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UNIVERSITY  OF  ILLINOIS  STUDIES 

IN   THE 

SOCIAL  SCIENCES 

VOL.  V  DECEMBER,  1916  No.  4 


BOARD  OF  EDITORS 

ERNEST  L.  BOGART  JOHN  A.  FAIRLIE 

LAURENCE  M.  LARSON 


PUBLISHED  BY  THE  UNIVERSITY  OF  ILLINOIS 

UNDER  THE  AUSPICES  or  THE  GRADUATE  SCHOOL 

URBANA,  ILLINOIS 


COPYRIGHT,  1917 
BY  THE  UNIVERSITY  OF  ILLINOIS 


Mine  Taxation  in  the  United  States 


LEWIS  EMANUEL  YOUNG 


PREFACE 

This  study  is  presented  as  a  report  upon  the  experience  of 
the  important  mining  states  in  the  taxation  of  mines  and 
mineral  lands.  The  investigation  of  the  historical  data  and  of 
the  laws  was  begun  in  1910  and  an  effort  has  been  made  to 
include  all  important  material  published  prior  to  November  1916. 
While  there  have  been  many  important  contributions  to  the  liter- 
ature of  particular  phases  of  mine  taxation  and  of  appraisal  of 
mining  property  for  the  purpose  of  taxation,  this  study  is  prob- 
ably the  first  publication  which  attempts  to  bring  together  data 
regarding  the  experience  of  the  states  in  taxing  mines  and  to 
compile  the  state  laws  affecting  mine  taxation. 

It  is  essentially  an  historical  statement  and  an  explanation 
and  comparison  of  methods  employed  in  assessing  and  taxing 
mining  properties.  While  the  material  may  not  be  of  service  to 
either  the  economist  who  is  an  authority  in  taxation  or  to  the 
mining  engineer  experienced  in  mine  valuation  it  is  hoped  that 
it  may  serve  to  bring  to  a  number  of  economists  something  of 
value  from  the  field  of  mining,  and  to  some  of  the  mining  pro- 
fession, something  helpful  from  the  field  of  taxation. 

Most  of  the  introductory  material  comprising  Chapter  I 
might  have  been  omitted  if  the  thesis  had  been  presented  to 
mining  men  alone.  Many  mining  engineers  have  little  know- 
ledge of  the  principles  of  taxation  and  several  engineers  have 
suggested  that  a  brief  statement  of  these  general  principles 
should  be  included.  Owing  to  the  fact  that  the  volume  of  the 
material  presented  has  greatly  exceeded  the  limits  originally 
proposed,  it  has  been  thought  advisable  to  omit  such  a  state- 
ment of  principles  and  the  engineer  who  desires  to  acquaint 
himself  with  the  principles  of  taxation  is  referred  to  the  well- 
known  works  of  Professors  H.  C.  Adams,  C.  C.  Plehn,  and  E.  E. 
A.  Seligman. 

The  statement  in  Chapter  I  regarding  the  mineral  resources 
of  the  United  States  is  entirely  inadequate  to  show  statistically 
their  importance  but  it  was  thought  advisable  to  note  briefly 
the  geographical  distribution  of  the  producing  mines  and  thus 
indicate  the  fact  that  the  problem  of  mine  taxation  is  not  a  local 
one  nor  limited  to  a  few  states. 

5 


In  the  statement  of  the  experience  of  the  various  states 
only  those  states  have  been  noted  in  which  the  practice  has  been 
different  from  the  other  important  mining  states  or  which  have 
made  several  changes  in  the  constitutional  or  statutory  enact- 
ments affecting  the  taxation  of  mines. 

It  is  to  be  regretted  that  so  few  data  of  taxes  paid  have 
been  available  for  use  in  connection  with  the  study  of  the  tax 
burden  on  mines.  Mining  men  generally  may  not  be  satisfied 
with  the  interpretation  of  the  census  statistics  employed  in 
Chapter  VII  but  these  have  been  used  simply  to  give  a  basis  for 
comparisons  among  the  states  and  among  different  types  of 
mines.  The  lack  of  data  should  indicate  the  necessity  for  the 
official  collection  and  publication  of  statistics  showing  the  tax 
burden  on  the  mining  industry. 

No  attempt  has  been  made  by  the  author  to  formulate  an 
original  plan  for  taxing  mines  and  mineral  lands.  There  are 
certain  fundamental  questions  upon  which  there  should  be  an 
agreement  before  any  far-reaching  revision  of  tax  laws  should  be 
undertaken.  Among  the  most  important  of  these  questions  are 
the  following : 

1.  Should  natural  resources  be  taxed  in  a  manner  or  by  a 
method  different  from  other  property? 

2.  Should  natural  resources  be  taxed  at  a  higher  rate  if 
taxed  in  the  same  manner  as  other  property  ? 

3.  Should  wasting  assets,  such  as  mines,  be  taxed  differently 
from  other  property? 

4.  Should  the  appraisal  of  mines  for  taxation  be  centra- 
lized, that  is,  placed  under  the  immediate  supervision  of  state 
officers  ? 

5.  Should  mines  be  appraised  physically  for  the  purpose 
of  taxation  ? 

In  the  summary  there  is  a  brief  statement  of  the  conclusions 
of  the  author. 

The  thanks  of  the  author  are  due  various  friends  among 
the  mining  profession  for  suggestions  and  for  the  criticism  of 
material,  and  he  acknowledges  his  indebtedness  to  the  members 
of  the  State  Tax  Commissions  in  all  the  mining  states  for  their 
courteous  criticism  of  copy  and  data.  In  several  instances  they 
have  undertaken  to  examine  the  entire  manuscript. 

The  author  desires  to  acknowledge  the  helpful  criticism  and 
suggestions  of  colleagues  in  the  University  of  Illinois  and  particu- 
larly of  Professor  E.  L.  Bogart  under  whose  supervision  the 
work  was  done. 

6 


TABLE  OF  CONTENTS 

PAGE 

CHAPTER  I.    INTRODUCTION  _ 9-28 

The  Nature  of  Mining  Property 10-20 

Definitions 10 

Sovereignty  and  Mineral  Rights  12 

Property  in  Mines  and  Mineral  Lands 17 

Nature  of  Earnings  from  Mining  Property 19 

Mineral  Resources  of  the  United  States 20 

Policy  Regarding  the  Mineral  Resources 22-25 

Federal  Policy 22 

State  Policy  23 

Review  of  United  States  Mining  History 25-28 

CHAPTER  II.    FEDERAL  TAXATION  OF  MINES,  MINERAL  LANDS,  AND 

MINING  CORPORATIONS  29-36 

Internal  Revenue  Taxes 29 

Mining  Licenses  „ 29 

Corporation  Excise  Tax 30 

Income  Taxes  31 

CHAPTER  III.     HISTORY  OF  MINE  TAXATION  IN  THE  STATES  37-77 

General  Statement  37-39 

Experience  of  the  States  39-77 

CHAPTER  IV.    CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS 78-121 

Constitutional  Limitations  in  General 78-80 

Statutory  Provisions  80 

Constitutional  and  Statutory  Provisions  by  States '. 81-121 

CHAPTER  V.    METHODS  OF  TAXING  MINES  AND  MINERAL  LANDS  IN 

THE  STATES  122-133 

General  Property  Tax  122 

Gross  Output  and  Property  Tax 124 

Net  Earnings  and  Property  Tax 125 

Gross  and  Net  Earnings  Tax  with  Property  Tax 127 

Tonnage  Tax 129 

Corporation  Taxes 130 

State  Income  Tax  131 

Tax  on  Royalties  or  Leases 133 

CHAPTER  VI.    SYSTEMS  OF  MINE  TAXATION  COMPARED 134-152 

Features  of  the  General  Property  Tax 134 

Output  Taxes 143 

Tonnage  Taxes  145 

Earnings  Tax 147 

Income  Tax  _ _ 150 

Equated  Income  Tax  151 

CHAPTER  VII.    PROBLEMS  OF  ADMINISTRATION 153-209 

Appraisal  of  Mineral  Properties  for  Taxation 153 

Methods  in  General  153 

Copper,  Lead,  Zinc,  and  Precious  Metal  Mines 156 

7 


PAGE 

Iron  Mines  1 58 

Coal  Mines  and  Lands 161 

Gold  Placers 166 

Petroleum  and  Natural  Gas  Wells 168 

-  Mineral  Rights  171 

Valuation  of  Mines  as  Affected  by  Taxes 173 

Experience  and  Methods,  by  States  and  Districts 175 

Minnesota  175 

Michigan  185 

Finlay  Appraisal  185 

Michigan  System  of  Appraisal 189 

Wisconsin  194 

Arizona  108 

Other  Western  Ore  Mining  States 199 

West  Virginia  202 

Kansas  _ 204 

Pennsylvania  Anthracite  Mines  and  Lands 204 

Mine  Accounting  and  Reports  to  Tax  Commissions 207 

Redemption  of  Capital  and  Depreciation 207 

CHAPTER  VIII.    THE  TAX  BURDEN  210-233 

Taxes  Paid  in  Each  State  in  1909 211 

By  all  Mines  212 

"    Coal   Mines   213 

"    Copper  Mines  214 

"     Iron  Mines  215 

"    Gold  and  Silver  Mines 216 

"    Gold  Placers  _ 216 

"    Lead  and  Zinc  Mines  217 

"     Petroleum  and  Natural  Gas  Producers 218 

"     Phosphate    Mines    _ 219 

"    Gypsum  Mines  219 

"    Quarries  220-224 

Taxes  Paid  by  Mining  Companies 225-230 

By  Copper  Mining  Companies 225 

"     Iron  Mining  Companies 226 

"    Coal  Mining  Companies 227 

"    Gold  and  Silver  Mining  Companies 228 

Increase  in  Assessed  Valuation  231-233 

CHAPTER  IX.    SUGGESTED  METHODS  OF  TAXATION  AND  REFORMS 234-257 

Criticisms    and    Suggestions   by    Mining   Engineers   and    Mine 

Operators   235 

By  State  Officers  and  Tax  Commissions 242 

By  Economists  „ - 247 

Single  Tax  Program  „ 250 

Conclusions _ .'. 252 

BIBLIOGRAPHY   „ 258-266 

INDEX  267-275 

8 


CHAPTER    I 
INTRODUCTION 

The  mineral  industry  of  the  United  States  had  an  output 
which  was  valued  by  the  United  States  Geological  Survey  at  two 
billion  four  hundred  million  dollars  in  1913  and  at  two  billion 
one  hundred  thousand  dollars  in  1914.1  The  average  value  per 
annum  during  the  period  1909  to  1914  was  approximately  two 
billion  one  hundred  million  dollars.  A  large  amount  of  capital 
is  invested  in  the  industry  and  in  certain  communities  the  mines 
comprise  the  principal  form  of  wealth.  In  such  districts  and  in 
those  states  in  which  mining  is  one  of  the  leading  industries  the 
problem  of  the  taxation  of  mines  and  of  mineral  lands  has  become 
of  great  importance. 

During  the  last  decade  considerable  attention  has  been 
directed  to  this  subject  by  the  taxing  bodies  of  a  number  of 
states,  and  important  legislation  directly  affecting  the  problem 
has  been  enacted  in  Pennsylvania,  West  Virginia,  Ohio,  Michigan, 
Wisconsin,  Minnesota,  Oklahoma,  and  in  a  number  of  the  Rocky 
Mountain  states. 

It  may  be  said  that  the  agitation  in  regard  to  the  taxation  of 
mines  has  been  due  largely  to : 

1.  The  large  dividends  paid  by  a  few  mines. 

2.  The  presumption  that  mines  in  general  pay  dividends 
at  a  much  higher  rate  upon  the    capital    invested    than    other 
industrial  enterprises. 

3.  The  ownership  of  mines  by  stock-holders  residing  out- 
side the  state  or  the  district  in  which  the  mines  are  located. 

4.  The    difficulty   experienced    by    county    and    township 
officials  in  appraising  mines  and  mineral  lands. 

5.  The  wide-spread  popular  notions  regarding  the  public 
interests  or  the  public  rights  in  mineral  resources. 

6.  The  suggested  methods  of  conserving  mineral  resources 
or  regulating  their  use  by  means  of  taxation. 

7.  The  general  and  increasing  tendency  to  shift  the  tax 
burden  to  industries. 

^Mineral  Resources  of  the  United  States,  1914,  p.  29. 

9 


10  MINE  TAXATION  IN  THE  UNITED  STATES  [540 

8.  Tax  reform  movements  in  general. 

9.  Increased  public  expenditures. 

It  is  the  purpose  of  this  study  to  assemble  some  of  the 
available  data  regarding  the  history  and  the  present  methods 
of  mine  taxation,  including  the  laws  of  the  states,  the  regula- 
tions of  tax  officials,  the  rules  and  methods  used  in  appraising 
mines  for  the  purpose  of  taxation,  and  the  statistics  of  taxes  paid 
by  different  types  of  mines  operating  under  the  various  state 
laws. 

NATURE  OP  MINING  PROPERTY 

Definitions.  The  definitions  of  mining  property  have  been 
developed  largely  through  the  acts,  opinions,  and  decisions  of 
Congress,  of  the  various  state  legislatures,  of  the  state  and 
Federal  courts,  and  of  the  various  taxing  officers  and  commis- 
sions. There  is  now  but  little  difference  of  opinion  in  regard 
to  the  definition  of  such  terms  as  mineral,  mine,  and  mining 
right,  and  in  the  classification  of  the  various  kinds  of  mining 
property. 

In  the  mining  industry,  "mineral"  is  now  defined  broadly 
to  include  "every  description  of  stone  and  rock  deposits,  whether 
metallic  substances  or  entirely  non-metallic".2  This  definition 
would  probably  be  accepted  by  most  of  the  American  and  English 
courts.  New  York  courts  have  recently  held  that  "mineral" 
includes  all  inorganic  substances.3  "Geologic  bodies  which  con- 
sist mainly  of  a  single  useful  mineral — for  instance,  beds  of 
pure  gypsum  or  coal — or  which  contain,  throughout  or  in  places, 
valuable  mineral  that  can  be  profitably  extracted —  for  in- 
stance, veins  containing  disseminated  gold — are  called  'mineral 
deposits '. '  '4 

The  term  ' '  mineral  land ' '  has  received  considerable  attention 
from  the  courts  on  account  of  the  variety  and  the  distribution 
of  minerals  found  upon  the  public  domain.  Federal  and  state 
courts  have  finally  agreed  that  the  term  has  an  economic  rather 
than  a  strictly  geologic  or  mineralogic  meaning  as  used  in  the 
Federal  statutes  regulating  the  entry  and  the  sale  of  the  lands 
of  the  public  domain.  One  of  the  most  concise  and  illuminating 
definitions  of  "mineral  land"  has  been  developed  by  Curtis  H. 
Lindley  as  follows: 

'  2Northern  Pacific  Co.  v.  Soderberg,  99  Fed.  506,  (1900). 
3White  v.  Miller,  200  N.  Y.  29,  (1910). 
4Lindgren,  W.,  Mineral  Deposits,  p.  2.    New  York,  1913. 


541]  INTRODUCTION  11 

"The  mineral  character  of  the  land  is  established  when  it 
is  shown  to  have  upon  or  within  it  such  a  substance  as — (a)  Is 
recognized  as  mineral,  according  to  its  chemical  composition  by 
the  standard  authorities  on  the  subject;  or — (b)  Is  classified  as 
a  mineral  product  in  trade  or  commerce;  or — (c)  Such  a  sub- 
stance (other  than  the  mere  surface  which  may  be  used  for 
agricultural  purposes)  as  possesses  economic  value  for  use  in 
trade,  manufacture,  the  sciences,  or  in  the  mechanical  or  orna- 
mental arts ; — And  it  is  demonstrated  that  such  substance  exists 
thereon  or  therein  in  such  quantities  as  render  the  land  more 
valuable  for  the  purpose  of  removing  and  marketing  the  sub- 
stance than  for  any  other  purpose,  and  the  removing  and 
marketing  of  which  will  yield  a  profit;  or  it  is  established  that 
such  substance  exists  in  the  lands  in  such  quantities  as  would 
justify  a  prudent  man  in  expending  labor  and  capital  in  the 
effort  to  obtain  it. '  '5 

This  definition  contemplates  the  classification  of  land  as 
either  "mineral"  or  "agricultural"  by  the  Federal  Government 
depending  upon  its  value  for  either  mining  or  agriculture.  It 
introduces  the  idea  of  both  quality  and  quantity  of  minerals  and 
the  possibility  of  the  profitable  working  of  the  minerals.  This 
same  idea  is  incorporated  in  a  recent  decision  of  the  United 
States  Supreme  Court  in  which  it  is  held  that  the  term  ' '  mineral 
lands"  includes  "all  such  as  are  chiefly  valuable  for  their 
deposits  of  a  mineral  character  which  are  useful  in  the  arts  or 
valuable  for  the  purpose  of  manufacture."6  The  Joint  Com- 
mittee on  Tax  Revision  in  Virginia  in  1914  advised  that  mineral 
lands  be  defined  by  law  to  be  "lands  containing  a  workable 
seam  or  vein  of  mineral  of  commercial  value '  '.7 

Various  of  the  state  courts  have  adopted  definitions  as 
broad  as  those  noted.  For  the  purpose  of  taxation  the  state  of 
Utah8  has  included  gypsum  under  the  term  "other  valuable 
mineral  deposits";  but  in  a  recent  appraisal  of  mining  proper- 
ties in  Michigan  it  was  agreed  by  the  appraisers  that  deposits 
of  salt,  gypsum,  limestone,  brick-clay,  and  marl  should  not  be 
appraised  on  a  mining  basis  as  "none  of  these  materials  is 
inherently  valuable  in  the  ground,  its  value  depending  entirely 

5Lindley,  C.  H.,  A  Treatise  on  the  American  Law  of  Mines,  I,  174. 
«Northern  Pacific  v.  Soderberg,  188  U.  S.  526,  (1902). 
''Report  of  Joint  Committee  on  Tax  Revision,  p.  35,  Richmond,  1914. 
8Nephi   Plaster  &  Mfg.  Co.  v.  Juab  Co.,  93  Pac.   53;  33  Utah   114, 
(1907). 


12  MINE  TAXATION  IN  THE  UNITED  STATES  [542 

upon  the  labor  that  is  put  upon  it,  or  on  its  commercial  situa- 
tion".9 

Formerly  the  term  "mine"  was  used  in  a  narrower  sense 
than  now.  The  idea  of  subterranean  excavation  distinguished  a 
mine  from  a  quarry.  But  with  the  extensive  development  of 
open  workings  the  term  came  to  include  underground  mines, 
open-pit  mines,  and  quarries.  Bouvier  defines  a  mine  as  a  "pit 
or  excavation  made  for  the  purpose  of  obtaining  mineral".10 
In  the  broad  sense  this  definition  includes  wells  bored  to  secure 
minerals,  quarries,  and  those  excavations  which  are  commonly 
called  mines. 

Sovereignty  and  mineral  rights.  Before  the  Revolution,  in 
practically  all  grants  of  land  there  was  reserved  for  the  Crown 
a  one-fifth  interest  in  all  gold  and  silver  mines,  following  the 
theory  that  these  minerals  belonged  to  the  Crown.  The  charter 
of  North  Carolina  in  1584,  which  was  granted  to  Sir  Walter 
Raleigh,  reserved  "the  fifth  part  of  all  the  ore  of  gold  and  silver 
that  might  be  gotten  and  obtained".11  The  grant  by  King  James 
of  a  charter  to  Virginia  included  the  right  to  explore  for  minerals 
from  the  34th  to  the  45th  parallel  but  reserved  one-fifteenth  of 
the  copper  as  well  as  one-fifth  of  ull  gold  and  silver.12  The  later 
charters  of  Virginia13  and  the  charters  of  Massachusetts14,  New 
Hampshire15,  Maryland18,  Maine17,  Rhode  Island18,  Connecti- 
cut19, and  Pennsylvania  20  made  a  reservation  of  an  interest, 
usually  one-fifth,  in  the  gold  and  silver. 

The  United  States  courts  held21  that  the  entire  title  to  the 
minerals,  including  the  royal  title  to  gold  and  silver  which  had 
been  reserved  by  the  Crown  in  Maryland,  passed  to  the  State, 

9Michigan  State  Board  of  Tax  Commissioners,  Appraisal  of  Mining 
Properties  of  Michigan,  p.  76,  1911. 

10Bouvier,  J.,  Law  Dictionary,  p.  180,  St.  Paul,  1914. 

"Poore,  B.  P.,  Charters  and  Constitutions,  II,  1380,  Washington,  1877. 

12Thorpe,  Federal  and  State  Constitutions,  VI,  3784,  Washington,  1909. 

13Ibid.,  p.  3796. 

™Ibid.,  pp.  1834,  1847,  1850. 

16Ibid.,  pp.  2434,  2437. 

16Poore,  op.  cit.,  II,  1271,  1274. 

"Thorpe,  op.  cit.,  Ill,  1627. 

"Poore,  op.  cit.,  II,  1602. 

19Thorpe,  op.  cit.,  I,  536. 

20Thorpe,  op.  cit.,  V,  3036. 

"147  U.  S.  282,  (1892). 


543]  INTRODUCTION  13 

"the  interest  of  the  proprietor  by  confiscation,  and  that  of  the 
king  by  conquest". 

Within  the  area  included  in  the  original  thirteen  states  the 
Federal  Government  has  held  no  public  lands  or  title  to  minerals, 
but  by  the  several  cessions  of  the  states  a  large  tract  west  of  the 
Alleghanies,  containing  valuable  mineral  deposits  came  under 
Federal  control.  Influenced  by  the  idea  that  gold  and  silver 
should  belong  to  the  Crown,  which  idea  had  prevailed  almost 
universally  up  to  this  time,  the  Continental  Congress22  on  May 
20,  1785,  in  enacting  laws  regarding  the  public  lands,  reserved 
"one-third  part  of  all  gold,  silver,  lead,  and  copper  mines  to 
be  sold  or  otherwise  disposed  of"  as  Congress  should  thereafter 
direct.  This  act  continued  in  force  until  1789. 

In  his  plan  for  the  disposition  of  the  public  lands  presented 
to  the  first  Congress  in  July  1791,  Alexander  Hamilton  was 
silent  on  the  subject  of  mineral  lands.23  On  May  18,  1796, 
Congress  in  providing  for  the  sale  of  the  lands  of  the  United 
States  in  the  territory  northwest  of  the  Ohio  River,  directed 
United  States  surveyors  to  note  the  true  location  of  all  mines, 
salt  licks,  and  salt  springs.  Certain  salt  lands  in  Ohio  were 
reserved  by  Congress  for  the  "future  disposal  of  the  United 
States".24  In  1803  Congress  placed  at  the  disposal  of  the 
President  the  sum  of  three  thousand  dollars  for  the  purpose  of 
developing  the  salt  springs  on  the  Wabash.25 

The  leasing  of  lead  lands  and  salt  springs  on  the  public 
domain  was  authorized  by  Congress  on  March  3,  1807.28  These 
leases  were  not  to  run  for  more  than  three  years.27  The  first 
leases  under  this  law  were  issued  in  1822  and  the  first  lead  in 
quantity  was  produced  in  1826.  The  royalties  and  rents  were 
difficult  to  collect  and  the  entire  sj^stem  proved  so  unpopular  that 
in  1834  the  operators  of  the  mines  and  smelters  refused  to  make 
further  payments.28  The  cession  by  the  Chippewas  of  the  Lake 

22I  Laws  Relating  to  Public  Lands,  II. 

23 American  State  Papers,  I,  4. 

24i  United  States  Statutes  at  Large  466. 

252  U.  S.  Statutes  at  Large  235. 

-«2U.  S.  Statutes  at  Large  445. 

27The  President  was  authorized  to  lease  the  lead  mines  of  Indiana 
Territory  for  a  term  not  exceeding  five  years.  2  Statutes  at  Large  448, 
(Mar.  3,  1807). 

28Whitney,  J.  D.,  Metallic  "wealth  of  the  United  States,  Philadelphia, 
1854- 


14  MINE  TAXATION  IN  THE  UNITED  STATES  [544 

Superior  District  on  March  12,  1843,  added  that  important 
mineral  district  to  the  public  domain  and  a  large  number  of 
leases  were  granted  in  that  district  in  1845,  but  the  issue  of 
these  leases  was  discontinued  in  1846.  The  United  States  courts 
had  held  that  Congress  has  power  to  lease  as  well  as  to  sell  public 
lands.29 

Congress  had  previously,  March  3,  1829,  authorized  the  sale 
of  lead  mines  reserved  in  the  state  of  Missouri.30  Other  minerals 
of  the  public  domain  were  still  reserved  from  sale.  On  July  1, 
1846,  the  lead  mines  and  lands  of  Illinois,  Arkansas,  and  the 
territories  of  Wisconsin  and  Iowa  were  opened  to  sale  following 
the  plan  of  the  Missouri  act.31  Finally,  on  March  1,  1847, 
Congress  authorized  the  sale  of  lands  containing  "copper,  lead, 
and  other  valuable  ores  after  geographical  examination  and 
survey."32  The  Chippewa  lead  lands  were  offered  for  sale 
March  3,  1847,33  and  the  mineral  lands  of  the  Lake  Superior 
District  in  1850.34 

The  pre-emption  law  of  September  4,  1841,  had  excluded 
"all  lands  on  which  are  situated  any  known  salines  or  mines."35 

Up  to  this  time  no  important  deposits  of  gold  or  silver  had 
been  discovered  upon  the  public  domain  and  the  Federal  laws 
made  no  reference  to  these  metals  except  incidentally  and  under 
the  inclusive  term  of  "mineral."36  It  was  not  until  July  13, 
1866,  that  Congress  provided  for  the  sale  of  gold  and  silver 
mines  and  lands.37  Later,  legislation  was  enacted  providing  for 
the  sale  of  all  types  of  mineral  deposits  upon  the  public  domain. 
When  the  patent  papers  are  issued  the  complete  title  to  the 
surface  and  to  the  mineral  rights  is  transferred  to  the  citizen. 

By  the  enactment  of  these  laws  the  system  of  private  own- 
ership of  mineral  deposits  has  been  developed  in  the  United 
States.  The  Federal  Government  has  completely  surrendered  its 
title  to  the  minerals,  and  the  mineral  lands  have  passed  to 
private  ownership  without  any  actual  or  implied  reservation  of 

2»i4  Pet.  526,  (1840). 

304  Statutes  at  Large  364. 

•19  Ibid.,  37. 

829  Ibid.,  146. 

889  Ibid.  179. 

349  Ibid.  472. 

8°5  Ibid.  453- 

86Donaldson,  Public  Domain,  Wsahington,  1884. 

87 14  Statutes  at  Large  137- 


545]  INTRODUCTION  15 

a  public  interest  greater  than  or  different  from  the  public  interest 
in  the  mineral  soils. 

Chief  Justice  Field38  said  that  in  no  instance  has  the  United 
States  "asserted  any  right  to  the  mines  as  being  reserved  from 
the  operation  of  the  patents.  The  patent  has  uniformly  been 
regarded  as  transferring  all  interests  which  the  United  States 
could  possess  in  the  soil  and  everything  imbedded  in  or  connected 
therewith.  Whenever  mines  have  been  claimed,  it  has  been  as  a 
part  of  the  lands  in  which  they  were  contained  and  when 
minerals  have  been  reserved  from  sale  or  other  disposition,  it 
has  only  been  by  reserving  the  lands  themselves.  It  has  never 
been  the  policy  of  the  United  States  to  possess  interests  in  lands 
in  connection  with  individuals. ' ' 

R.  "W.  Raymond,  an  eminent  American  authority  on  mining 
law  said,  ' '  The  right  of  the  land  owner  is  supreme ;  and  even 
when  the  Federal  Government  has  legislated  concerning  mining 
titles  it  has  done  so  for  public  lands  only,  and  in  its  capacity  as 
their  owner,  with  the  power,  given  to  the  land  owner  by  the 
English  common  law,  of  separating  the  estate  in  minerals  from 
the  estate  in  soil  and  disposing  of  either  upon  any  terms  which 
it  might  dictate."39 

There  has  evidently,  been  nothing  in  the  history  of  the 
development  of  the  mining  customs  or  of  the  mining  laws  of  the 
United  States  to  warrant  any  assumption  that  the  mining 
industry  should  be  taxed  upon  a  different  basis  from  other 
industries  operating  upon  property  secured  without  reservation 
by  complying  with  Acts  of  Congress. 

Congress  has  enacted  laws  regulating  the  location  of  claims 
upon  the  mineral  deposits  of  the  public  domain,  but  these  laws 
are  not  effective  in  all  the  states.  The  public  domain  has  never 
included  any  lands  in  the  original  thirteen  states  nor  in  Ver- 
mont, Kentucky,  Maine,  West  Virginia,  and  Texas.  The  public 
land  in  Tennessee  was  granted  to  the  state  by  the  United  States. 
The  public  lands  in  Ohio,  Indiana,  Illinois,  and  Iowa  were  largely 
disposed  of  before  the  enactment  of  the  general  mining  laws. 
The  lead  lands  of  Illinois,  Iowa,  Arkansas,  Missouri,  and  Wis- 
consin and  the  lands  of  Michigan,  Minnesota,  and  Wisconsin 
valuable  for  copper  and  iron  were  sold  under  special  laws.  All 
the  public  lands  in  Oklahoma  were  declared  to  be  agricultural; 
however,  the  federal  mining  laws  have  been  extended  by  Congress 

38Moore  v.  Smaw,  17  Cal.  199,  (1861). 

*»Mineral  Resources  of  the  United  States,  p.  1004,  1883-1884. 


16  MINE  TAXATION  IN  THE  UNITED  STATES  [546 

to  certain  lands  acquired  from  the  Indian  tribes.  The  general 
mining  laws  enacted  by  Congress  are  effective  on  the  public 
domain  in  Alaska,  Arizona,  Arkansas,  California,  Colorado, 
Florida,  Idaho,  Louisiana,  Mississippi,  Montana,  Nevada,  New 
Mexico,  North  Dakota,  Oregon,  South  Dakota,  Utah,  Washington, 
Wyoming,  and  parts  of  Oklahoma.40 

When  the  Union  was  formed  there  were  extensive  tracts  of 
public  lands  within  the  states  and  it  devolved  upon  the  states 
to  provide  equitable  laws  under  which  citizens  might  acquire  title 
to  these  lands.  The  mineral  deposits  commanded  special  legisla- 
tion in  only  a  few  states,  it  being  held  generally  that  complete 
title  to  the  minerals  should  pass  from  the  state  to  the  individual 
when  the  title  to  the  surface  passed.  In  1843  an  act  of  the 
Pennsylvania  legislature  established  the  principle  that  the  entire 
estate  of  the  Commonwealth  passed  with  the  patent  granted  by 
the  State.  The  Georgia  courts  held  in  1844  that,  unless  specific 
reservation  is  made,  title  to  minerals  passes  with  the  land.41 

The  notable  exception  to  this  practice  of  the  states  has  been 
New  York.  In  1786  the  New  York  legislature  directed  the  reser- 
vation of  minerals  on  state  lands.    Gold  and  silver  were  held  to 
belong  to  the  sovereign,  which  in  this  instance  was  the  state. 
This  right  of  sovereignty  was  reasserted  by  the  state  legislature 
in  1828.42     At  present  the  New  York    statutes    include43    the 
statement  that  all  mines  of  gold  or  silver  discovered  anywhere 
in  the  state  become  the  property  of  the  state;  the  state  also 
claims  mines  discovered  on  lands  owned  by  persons  not  citizens 
of  the  United  States ;  all  mines  discovered  upon  lands  belonging 
to  the  state ;  and  all  mines  discovered  upon  the  lands  of  a  citizen 
of  the  United  States  provided  that  the  ore  on  an  average  shall 
contain  less  than  two  equal  third  parts  in  value  of  copper,  tin, 
iron,  and  lead  or  any  of  these  metals.     Upon  the  discovery  of 
minerals  on  the  lands  of  the  state,  citizens  of  the  state,  after 
complying  with  certain  regulations,  may  work  the  mines  if  they 
pay  a  royalty  to  the  state  of  two  percent  of  the  market  value  of 
the  product.     The  discoverer  is  exempted  from  paying  royalty 
for  twenty-one  years  and  thereafter  is  required  to  pay  a  royalty 
of  only  one  percent. 

The  state  of  Texas   owned   extensive   tracts   of   land   and 

40Lindley,  American  Law  of  Mines,  I,  38. 
41  State  of  Georgia  v.  Canatee,  3  Kent  378. 
«3  Kent  378. 
**New  York  Laws,  1909,  Vol.  IV,  Chap.  50. 


547]  INTRODUCTION  17 

originally  (1837)  reserved  the  minerals,  but  in  1866  the  State 
provided  for  the  sale  of  mineral  lands  without  reservation. 

Michigan  has  enacted  laws  regarding  precious  metal  mines, 
specifying  that  mines  containing  gold  and  silver  in  any  pro- 
portion are  the  property  of  the  people  of  the  State  in  their  right 
of  sovereignty.44  However,  provision  has  been  made  that  this 
shall  never  apply  to  mines  in  lands  owned  by  citizens  of  the 
State. 

In  the  early  days  of  mining  in  California,  the  State  held 
that  it  possessed  the  regalian  right  to  the  precious  metals  in  the 
public  lands  of  the  United  States.  The  early  ruling  of  the  courts 
was  reversed  in  186145  and  California  has  abandoned  its  claim 
to  rights  in  the  precious  metals.  California  has  never  asserted 
any  regalian  rights  in  the  precious  metals  in  private  lands. 
"Although  apparently  not  expressly  passed  upon  in  other  states, 
it  is  not  probable  that,  if  the  question  ever  arises,  any  regalian 
right  to  the  precious  metals  would  be  recognized  in  any  of 
them."46 

Property  in  mines  and  mineral  lands.  Mining  operations 
may  be  conducted  under  various  types  of  ownership  of  the 
minerals  or  of  rights  to  work  them : 

(1)  The  title  to  the  surface  and  to  the  minerals  beneath 
the  surface  and  within  the  property  lines  may  rest  in  one  person. 

(2)  The  title  to  the  surface  may  carry  with  it  the  right, 
called  the  "extralateral  right",47  to  follow  the  vein  of  ore  on 
its  dip  outside  certain  property  lines. 

(3)  The  title  to  the  minerals   may   be   entirely   separate 
from  the  surface  right.48 

(4)  The  right  to  mine  may  be  secured  as  a  grant  or  lease 
upon  the  payment  of  a  rental  or  of  a  royalty. 

(5)  The  mining  right  may  be  simply  a  license  or  a  grant 
for  a  short  period  of  time,  revocable  at  the  pleasure  of  the  owner 
of  the  mining  right.49 

In  certain  states  in  which  the  title  to  the  minerals  has  been 
acquired  from  the  Federal  Government  by  the  location  of  mining 
claims  upon  the  public  domain  and  in  accordance  with  the  Acts 

442  How.  Ann.  Stat.,  Sec.  5475,  5476. 
45i7  Cal.  199. 

49Shamel,  C.  H.,  Mining,  Mineral,  and  Geological  Law,  p.  26. 
47U.  S.  Revised  Statutes,  Sec.  2322. 
48i  Pa.  726;  84  Ala.  228;  96  111.  279;  137  Pac.  386. 
49Barringer  and  Adams,  The  Law  of  Mines  and  Mining  in  the  United 
States,  p.  67.    See  also  53  Pa.  216;  123  N.  Y.  298;  32  Fed.  Rep.  177- 


18  MINE  TAXATION  IN  THE  UNITED  STATES  [548 

of  Congress  of  1866  and  of  1872,  the  title  to  the  surface  of  such 
a  mining  claim  upon  a  lode  or  vein  carries  with  it  the  right  to 
follow  the  vein  on  its  dip  and  between  vertical  planes  through 
the  parallel  end  lines  of  the  claim.  The  privilege  of  following 
the  vein  on  its  dip,  called  the  ' ' extralateral  right",  gives  to  the 
locator  upon  a  vein  the  right  to  mine  ore  outside  his  side 
(property)  lines  but  similarly  it  takes  from  him  the  right  to  any 
minerals  within  his  property  lines  occurring  in  veins  which  do 
not  outcrop  within  his  own  surface  boundaries.  In  other  words, 
the  discoverer  of  a  vein  who  locates  and  holds  a  lode  claim  upon 
the  public  domain  in  accordance  with  the  federal  laws  and  the 
state  statutes,  acquires  the  unlimited  and  the  perpetual  mining 
right  upon  that  particular  vein  between  vertical  planes  through 
the  parallel  end  lines  of  his  claim. 

When  such  a  claim  is  patented  according  to  the  federal 
laws,  a  deed  is  issued  and  the  claim  becomes  taxable  by  the  state 
as  other  real  estate.  Prior  to  patenting,  the  vein  itself  remains 
the  property  of  the  United  States  and  is  not  subject  to  taxation. 
The  possessory  right  (of  the  locator)  to  the  claim  or  location  can 
be  transferred  or  sold,  is  held  to  be  property,  and  is  subject  to 
taxation  by  the  state  and  the  local  authorities.50  In  some  states 
this  possessory  right  is  classed  as  personal  property51  and  in 
others,  as  real  estate.52 

The  title  to  the  minerals  may  be  entirely  separate  from 
the  soil  and  the  title  to  the  minerals  may  be  divided  so  that 
the  right  to  mine  coal  or  only  one  seam  of  coal  may  be  in  one 
estate,  another  seam  of  coal  may  belong  to  a  second,  the  right 
to  drill  for  oil  and  gas  may  belong  to  a  third,  and  the  right  to 
all  other  minerals  may  be  reserved  for  a  fourth.53  The  right 
to  oil  and  gas  is  recognized  in  the  same  way  as  is  the  right  to 
solid  minerals  in  place.54  Such  a  separation  of  interests  may 
be  made  by  sale  or  by  reservation,  and  a  deed  for  the  mining 
rights  is  executed  the  same  as  for  the  surface  rights. 

The  mining  right  as  a  lease  or  grant  for  a  definite  period 
is  recognized  by  the  courts  as  a  property  right  and  is  taxable. 

"State  v.  Moore,  12  Cal.  56,  (1859)  ;  Hale  and  Norcross  G.  &  S.  M. 
Co.  v.  Storey  Co.,  i  Nev.  105,  (1865)  ;  Forbes  v.  Gracey,  94  U.  S.  762, 
(1876). 

61  Waller  v.  Hughes,  n  Pac.  122,  (1886). 

"i  Mont.  245,  (1870). 

"Northern  Pacific  v.  Mjelde,  137  Pac.  386,  (1913). 

"Kelly  v.  Oil  Co.,  57  Ohio  St.  317,  (1897). 


549]  INTRODUCTION  19 

Mining  operations  are  frequently  carried  on  under  lease  when 
the  mineral  rights  are  severed  from  the  surface.  Under  such 
conditions  the  following  interests  exist  within  and  upon  the  same 
tract  of  land:  (a)  The  surface  right,  (b)  the  mineral  right, 
(c)  the  leasehold. 

License  to  mine  for  a  short  period  is  usually  not  recognized 
as  a  separate  interest  for  purposes  of  taxation. 

The  following  kinds  of  property  owned  by  mining  operators 
are  recognized  and  distinguished  by  the  statutes  of  various 
states:  (1)  Surface  rights  when  valuable  for  other  than  mining 
purposes;  (2)  surface  improvements  used  for  other  than  mining 
purposes;  (3)  surface  improvements  used  only  in  conducting 
the  operations  of  one  mine  or  a  group  of  mines  owned  by  the 
same  interests;  (4)  surface  improvements  used  in  conducting  a 
custom  business,  such  as  a  smelter  or  mill  which  receives  ore  in 
addition  to  that  produced  by  the  mines  owned  by  the  company 
operating  the  smelter  or  mill;  (5)  unpatented  mineral  land; 
(6)  undeveloped  mineral  lands;  (7)  mining  rights  separate  from 
the  surface;  (8)  non-producing  mines;  (9)  unprofitable  mines; 
(10)  profitable  mines;  (11)  mined  mineral  product;  and  (12) 
mining  leases. 

The  nature  of  the  earnings  of  mines.  The  value  of  mining 
property  is  determined  either  immediately  or  remotely  by  the 
earnings  it  will  return  upon  the  capital  invested.  Mining 
operations  exhaust  mineral  deposits  and  the  returns  from  the 
sale  of  the  product  must  be  sufficient  to  pay  all  operating 
expenses,  a  dividend  upon  the  capital  invested  sufficient  to 
justify  the  mining  risk  entailed,  and  to  amortize  the  entire 
capital  invested  within  the  period  of  the  assumed  life  of  the 
mine.  Previously  it  has  been  unusual  for  American  metal  mining 
companies  to  create  a  sinking-fund  to  replace  the  capital  invested 
but  this  is  now  being  done  by  some  interests.  They  have  instead 
paid  larger  dividends  and  have  left  it  to  the  stock-holders  to  set 
aside  annually  in  their  personal  accounts  some  suitable  item 
for  redeeming  the  capital  invested.  The  American  mining 
dividend  therefore  must  generally  be  considered  on  an  entirely 
different  basis  from  the  dividend  upon  other  industrial  invest- 
ments because  it  represents  both  a  dividend  and  an  annuity  to 
reimburse  the  stock-holder  for  the  sum  he  has  invested  for  his 
stock.  If  the  mining  company  is  actually  providing  a  sinking- 
fund  in  anticipation  of  the  depletion  of  the  mineral  deposit,  this 
fact  must  be  recognized.  In  other  words,  the  management  of 


20  MINE  TAXATION  IN  THE  UNITED  STATES  [550 

such  a  mine  would  be  maintaining  its  assets  (the  ore  reserves 
plus  the  sinking-fund)  at  not  less  than  a  certain  amount.  If  no 
sinking-fund  is  thus  maintained  the  assets  of  the  company  will 
be  constantly  decreasing  with  the  depletion  of  the  mineral 
deposit  and  ultimately  not  only  the  earning  power  of  the  mine 
will  be  lost  but  the  entire  value  of  the  mine  will  be  represented 
by  second-hand  equipment  on  the  property  which  is  frequently 
so  remote  from  a  market  that  it  will  be  of  no  value  whatever. 

In  appraising  mines  for  the  purpose  of  taxation  and  in 
estimating  the  returns  from  mines  and  incomes  from  mining 
investments  it  will  be  necessary  to  keep  clearly  in  mind  the  real 
nature  of  the  earnings  of  mines.55 

MINERAL  RESOURCES  OF  THE  UNITED  STATES 

Geographical  distribution  of  the  mineral  deposits.  Valuable 
mineral  deposits  are  scattered  widely  throughout  the  United 
States.  The  statistics  of  the  United  States  Geological  Survey 
show  that  of  all  the  states  only  Rhode  Island  and  Delaware 
produced  less  than  one  million  dollars  worth  of  minerals  in  1912. 
Of  the  total  value  of  the  output  of  the  United  States  the  New 
England  states  produced  1.4  percent ;  the  Middle  Atlantic  states 
30  percent ;  the  Southern  states  12.4  percent ;  the  Central  states 
29.7  percent;  the  Mountain  states  16.6  percent;  and  the  Pacific 
states  6.1  percent.  Twenty-eight  states  are  important  producers 
of  coal,  twenty-four  produce  some  iron-ore,  twenty  have  pro- 
duced and  eleven  are  now  important  producers  of  petroleum, 
nine  produce  copper,  sixteen  produce  gold,  twenty-six  quarry 
granite,  fifteen  mine  lead  and  zinc,  thirty  quarry  limestone  on 
a  large  scale,  twelve  mine  gypsum,  and  thirty-one  quarry  sand- 
stone. 

While  a  number  of  the  states  have  not  developed  important 

"Marshall  says :  "A  royalty  is  not  a  rent,  though  often  so  called. 
For,  except  when  mines,  quarries,  etc.,  are  practically  inexhaustible,  the 
excess  of  their  income  over  their  direct  outgoings  has  to  be  regarded, 
in  part  at  least,  as  the  price  got  by  the  sale  of  stored-up  goods — stored 
up  by  nature  indeed,  but  now  treated  as  private  property;  and  therefore 
the  marginal  supply  price  of  minerals  includes  a  royalty  in  addition  to  the 
marginal  expenses  of  working  the  mine.  The  royalty  itself  on  a  ton  of 
coal,  when  accurately  adjusted,  represents  that  diminution  in  the  value  of 
the  mine,  regarded  as  a  source  of  wealth  in  the  future,  which  is  caused 
by  taking  a  ton  out  of  nature's  storehouse."  Marshall,  A.,  Principles  of 
Economics,  6th  Ed.  Book  V,  Chap.  X,  Sec.  6.  See  also  Ibid.  Book  IV, 
Chap.  Ill,  Sec.  7;  Taussig,  F.  W.,  Principles  of  Economics,  II,  92. 


551]  INTRODUCTION  21 

metalliferous  deposits  or  extensive  and  valuable  deposits  of 
mineral  fuels,  yet  most  of  the  states  possess  mineral  deposits  of 
economic  importance  which  are  contributing  toward  the  welfare 
of  the  commonwealth  and  of  the  nation. 

Importance  of  the  mineral  resources.  The  value  of  the 
mineral  resources  in  various  states  and  in  the  nation  as  a  whole 
has  undoubtedly  been  realized  to  a  large  degree  by  citizens,  by 
officials,  and  by  economists  at  home  and  abroad.  Leroy-Beaulieu 
in  discussing  the  mineral  industry  of  the  United  States56  says: 
''Clearly  no  country  has  been  so  richly  dowered  by  nature  with 
mineral  resources  of  all  sorts  and,  however  high  may  be  our 
estimate  of  the  qualities  of  its  people,  it  is  not  unfair  to  say  that 
the  marvelous  wealth  of  the  subsoil  of  the  United  States 
contributes  more  than  aught  else  to  its  economic  strength." 

The  rapid  development  of  these  resources  is  indicated  by  the 
statistics  of  value  of  mineral  products  as  reported  by  the  United 
States  Geological  Survey,  as  follows : 

Year  Total 

1880 $  364,928,298 

1890 » _ 606,476,380 

1900 _ 1,107,031,392 

1905 _ 1,623,664,785 

1910 _ 1,991,216,220 

1911 _ 1,926,284,008 

1912 2,244,033,833 

1913 2,439,159,728 

1914  ...„ 2,114,946,024 

It  seems  important  then  that  there  should  be  adopted  a 
policy  both  for  the  development  and  the  use  of  mineral  resources 
upon  the  public  domain  and  within  lands  privately  owned  which 
will  result  in  the  most  beneficial  use  of  these  resources  under  our 
existing  form  of  government. 

At  the  present  time,  according  to  the  United  States  Geolo- 
gical Survey,"  this  country  is  contributing  a  large  part  toward 
the  world 's  annual  production  of  minerals.  ' '  The  United  States 
mines  nearly  40  percent  of  the  world's  output  of  coal  and  pro- 
duced 65  percent  of  the  petroleum  in  1913.  Of  the  more 

5eLeroy-Beaulieu,  P.  The  United  States  in  the  Twentieth  Century, 
p.  223,  New  York,  1907. 

"Smith,  G.  O.  Our  Mineral  Reserves.  Bui.  599,  U.  S.  Geological 
Survey.  Washington,  1914. 


22  MINE  TAXATION  IN  THE  UNITED  STATES 

essential  metals,  40  percent  of  the  world's  output  of  iron  ore 
is  raised  from  American  mines,  and  the  smelters  of  the  United 
States  furnish  the  world  with  55  percent  of  its  copper  and  at 
least  30  percent  of  its  lead  and  zinc." 

An  estimate  of  mineral  resources  can  not,  of  course,  be  more 
than  an  approximation  which  attempts  to  predict  what  quality 
of  mineral  deposits  may  eventually  be  of  economic  importance. 
For  example,  the  coal  resources  of  the  United  States,  exclusive 
of  Alaska,  have  been  estimated  at  fifteen  hundred  billion  short 
tons.58  At  the  present  rate  of  production  and  of  domestic  con- 
sumption the  supply  would  last  many  years;  at  an  increasing 
rate  of  consumption,  the  life  of  the  deposits  would  be  greatly 
shortened.  It  is  outside  the  field  of  this  investigation  to  enter 
into  a  discussion  of  the  extent  and  value  of  these  resources, 
or  to  propose  policies  for  their  development  and  use,  but  it 
seems  appropriate  to  direct  attention  to  the  policy  and  the 
experience  of  the  nation  and  of  the  political  units  in  dealing 
with  the  mineral  resources. 

POLICY  REGAEDING  THE  MINERAL  RESOURCES 

Federal  policy.  During  the  period  from  1785,  at  which  time 
the  Continental  Congress  first  reserved  rights  in  minerals,  to 
1866,  when  Congress  provided  for  the  sale  of  the  lode  lands 
of  the  West,  there  seemed  to  be  considerable  difference  of  opinion 
as  to  the  policy  that  Congress  should  pursue  in  disposing  of 
the  mineral  lands  of  the  public  domain.  The  almost  complete 
failure  and  the  unpopularity  of  the  leasing  system,  as  tried 
in  the  Mississippi  Valley  and  in  the  Lake  Superior  region,  caused 
President  Polk  in  a  message  to  Congress,  December  2,  1845,  to 
recommend  that  the  mineral  lands  be  placed  upon  the  market 
and  sold.  Directly  thereafter  Congress  opened  to  sale  the  mineral 
lands  of  the  Middle  West.  However,  the  specific  reservation  of 
minerals  by  the  pre-emption  laws  and  in  the  grants  to  railroads 
and  to  states  continued  the  problem  on  an  even  greater  scale, 
particularly  after  gold  was  discovered  in  California  in  1848. 
Various  schemes  of  government  ownership  and  of  government 
leases  were  suggested,  but,  with  the  experience  with  the  lead 
leases  serving  to  warn  against  the  leasing  system  and  with  the 
miner  pointing  to  the  generous  policy  of  the  government  in 
disposing  of  agricultural  lands,  Congress  finally,  in  1866, 

B8/fru/.,  p.  n. 


553]  INTRODUCTION  23 

adopted  the  policy  of  selling  the  mineral  lands.  This  policy 
has  been  extended  to  include  all  types  of  mineral  deposits. 

The  revenue  secured  from  the  sale  of  these  mineral  lands 
has  been  comparatively  small  and  the  federal  government  has 
derived  no  additional  revenue  from  them  except  through  internal 
revenue  taxes,  licenses,  and  the  corporation  and  income  taxes; 
but  the  federal  policy  has  encouraged  the  rapid  development  of 
the  mineral  resources  of  the  Western  states. 

State  policy  relating  to  mines.  The  policies  of  the  various 
states  in  dealing  with  mineral  resources  have  varied  widely.  The 
policy  may  change  with  the  economic  development  of  the  state 
and  one  of  the  following  plans  may  be  adopted: 

A.  The  state  may  retain  the  title  to  the  minerals  and  may 
either  (1)  carry  on  mining  operations  as  a  state  enterprise  or 
(2)  may  permit  citizens  to  open  mines  and  for  this  privilege 
the  state  may  charge  a  royalty  or  a  rental. 

B.  The  state  may  sell  the  lands  or  the  mining  rights  and 
then  (3)  tax  the  mines  or  mining  rights,  or  (4)  may  exempt 
them  from  taxation,  or  (5)   may  grant  bounties  or  premiums 
in  order  to  encourage  and  hasten  the  development  of  the  mineral 
resources. 

The  granting  of  an  exemption  from  taxation  or  of  a  bonus 
or  a  reward  may  occur  during  the  development  period  of  mining 
or  during  the  decline  of  a  particular  mine,  in  the  latter  case  in 
order  to  prolong  the  period  of  operation. 

Some  of  the  states,  notably  Minnesota,  have  retained  large 
areas  of  public  land  containing  extensive  mineral  deposits  and 
have  leased  these  to  mining  operators,  thus  securing  considerable 
state  revenue.  In  some  states  large  grants  of  land  have  been 
set  aside  for  the  public  schools  and  for  institutions  of  higher 
learning.  Upon  exploration  some  of  these  tracts  have  been 
found  to  contain  valuable  mineral  deposits.  The  policy  of 
leasing  these  lands  has  frequently  been  adopted.  Such  state  and 
school  lands  are  generally  exempt  from  taxation.  The  effect  of 
this  reservation  of  large  tracts  of  land,  exempt  from  taxation, 
within  important  industrial  districts  is  to  increase  the  burden 
of  local  taxation  upon  the  adjacent  property. 

Exemptions.  The  states  that  have  exempted  mines  from 
taxation  have  planned  to  assist  the  entire  mining  industry 
during  a  stated  period  or  to  assist  single  mines  during  the 
development  period. 

(1)  Every  mine  may  be  exempt  during  the  years  immedi- 
ately following  its  opening.  Maine  has  exempted  mines  from 


24  MINE  TAXATION  IN  THE  UNITED  STATES  [554 

taxation  for  ten  years  from  the  date  of  opening.  Improvements 
and  lands  are  taxed  as  is  other  property.59  Vermont  exempts 
mines  and  quarries  together  with  improvements  and  machinery 
for  a  period  of  five  years.  This  period  may  be  extended  by  the 
vote  of  the  municipality.  60 

(2)  All  mines  may  be  exempt  during  the  period  between 
specified  dates.     Colorado  exempted  all  mines,  except  surface 
improvements,  for  ten  years  after  the  admission  of  the  state  to 
the   Union.61     Louisiana   permitted   the    exemption   of  mining 
companies  from  local  taxes  from  1900  to  1910.62    In  1885  Michi- 
gan suspended  the  specific  tax  on  mines,  as  it  applied  to  gold, 
silver,  and  lead  mines,  for  a  period  of  five  years.63    The  Arkansas 
constitution   of   1874   provided    that    the    General    Assembly 
might  by  general  law,  exempt  from  taxation  the  capital  invested 
in  any  or  all  mines  in  the  state  for  the  term  of  seven  years 
following  the  ratification  of  the  constitution.64 

(3)  All  mines  may  be  exempt  from  certain  taxes  during 
any  year  that  the  output  is  less  than  a  certain  amount.     An 
Oregon  statute  provides  that,  if  the  output  of  a  domestic  mining 
company  does  not  exceed  one  thousand  dollars  in  the  preceding 
year,  the  company  may  pay  ten  dollars  in  lieu  of  the  annual 
license  fee.65    This  same  principle  applies  in  a  number  of  states 
which  classify  mines  as  producing  and  non-producing.     Mines 
having  an  output  in  any  year  valued  at  less  than  a  specified 
sum  are  exempt  during  that  year. 

(4)  All  mines  may  be  exempt    from    taxation    until    a 
dividend  is  earned.    New  Hampshire  taxes  the  surface  improve- 
ments but  exempts  the  mine  itself  until  the  first  dividends  are 
declared.66 

(5)  Mines  may  be  exempted  at  the  discretion  of  the  state 
legislature.     The  constitution  of  Idaho  permits  the  legislature 
from  time  to  time  to  make  such  exemptions  as  shall  seem  neces- 
sary and  just.67 

^Revised  Statutes  of  Maine,  1903,  Chap.  IX,  Sec.  3  and  6. 

^Vermont  Public  Statutes,  1906,  Sec.  499. 

^Colorado  Constitution,  Art.  X,  Sec.  3. 

*2Louisiana  Constitution,  Art.  230. 

63Public  Acts  of  Legislature  of  Michigan,  1885,  Act  131. 

^Constitution  of  Arkansas,  1874,  Art.  X,  Sec.  3. 

^Oregon  Laws  of  1913,  Chap.  73. 

MNew  Hampshire  Public  Statutes,  1901,  Chap.  55,  Sec.  4. 

*7Idalw  Constitution,  Art.  VII,  Sec.  5. 


555]  INTRODUCTION  25 

Bounties.  Industrial  bounties  have  been  granted  by  various 
states  from  time  to  time  in  order  to  encourage  mining.68 
Bounties  for  the  production  of  salt  were  granted  by  New  York 
in  1822,  by  Michigan  in  185969  and  by  Alabama  in  1861.  In 
1827  Vermont  offered  a  premium  of  five  hundred  dollars  for 
the  first  five  hundred  bushels  of  salt  manufactured  in  the  state. 
Utah  offered  one  thousand  dollars  in  1854  to  any  one  who  would 
open  a  good  coal  mine  within  forty  miles  of  Salt  Lake  City.70 
In  1887  Nevada  offered  a  series  of  rewards  for  the  improvement 
of  metallurgical  methods  in  the  reduction  of  ores  containing 
the  precious  metals  and  in  1901  offered  a  reward  of  one  thousand 
dollars  to  the  first  person  who  should  produce  five  barrels  of 
crude  petroleum  from  a  well  within  the  state.  Similar  prizes 
were  offered  for  the  production  of  natural  gas  and  artesian 
water. 

REVIEW   OF    UNITED    STATES    MINING    HISTORY 

The  development  of  systems  of  taxing  mines  logically 
followed  the  development  of  the  mining  industry.  Prior  to 
1848,  mining  did  not  hold  the  important  position  as  a  national 
industry  that  it  now  holds.  When  the  Federal  Government  was 
organized  in  1780  there  was  but  little  mining  within  the 
national  boundaries.  Probably  the  most  important  mines  were 
those  for  iron  which  had  been  opened  along  the  Atlantic  coast.71 
The  first  seventy  years  of  our  national  life  were  notably  a  period 
of  acquisition  of  territory  rich  in  minerals,  and  a  period  of 
exploration  and  of  discovery.  Among  the  noteworthy  events  and 
developments  in  the  mining  industry  were  the  opening  of  the 
anthracite  fields  in  Pennsylvania,  the  mining  of  bituminous 
coal  in  Pennsylvania,  Maryland,  and  other  eastern  states;  the 
use  of  anthracite  and  of  bituminous  coal  in  the  blast-furnaces; 
the  development  of  gold  mining  on  a  small  scale  in  Georgia  and 
several  other  southern  states;  the  opening  of  copper  and  iron 
mines  in  Michigan ;  of  zinc  mines  in  New  Jersey,  of  lead  mines 
in  Missouri,  Illinois,  Iowa,  and  Wisconsin;  and  the  discovery 
of  gold  in  California  in  1848.  With  the  great  development  of 
the  precious  metal  deposits  there  came  also  extensive  industrial 
development  and  the  opening-up  of  deposits  of  the  base  metals 

68Powell,  F.  W.     Industrial  Bounties,  Quarterly  Journal  of  Econom- 
ics, 1913,  XXVIII,  p.  191. 
69Repealed  in  1869. 

™Utah  Legislative  Journal,  1860-1861,  p.  73;  1862-1863,  p.  65. 
71  Swank,  J.  M.    American  Iron  Trade  in  1876.     Philadelphia,  1876. 


26  MINE  TAXATION  IN  THE  UNITED  STATES  [556 

and  of  fuels.  Prior  to  1848  little  attention  was  paid  to  the 
taxation  of  mines. 

The  period  from  1848  to  1859  was  notably  a  placer  mining 
period.  The  value  of  the  output  of  gold  and  silver  for  the  period 
is  estimated  at  $325,000,000.  The  discovery  of  the  Comstock 
and  other  lodes  in  the  Rocky  Mountain  region  in  1859  opened 
the  bonanza  period  of  lode  mining  in  United  States  mining 
history. 

During  the  years  from  1859  to  1898  there  was  substantial 
development  and  extensive  scientific  exploration  of  the  mineral 
resources  of  the  nation.72  The  development  was  general 
throughout  the  states,  but  only  the  richest  and  the  easily  acces- 
sible deposits  were  opened.  Taxation  of  mines  received  atten- 
tion in  the  western  states  and  territories,  but  in  the  Middle  West 
and  in  the  East  relatively  little  attention  was  paid  to  this  phase 
of  taxation.  With  the  increase  in  the  population  of  the  mining 
districts  and  with  the  development  of  extensive  agricultural  and 
industrial  interests  in  the  mining  states  and  districts,  tax 
payers  in  general  have  endeavored  to  place  a  relatively  greater 
tax  burden  on  the  mines  and  mineral  lands.  This  movement 
came  largely  during  the  period  following  1890. 

The  discovery  of  iron  ore  on  the  Mesabi  iron  range  in 
Minnesota  in  1890  has  been  referred  to  as  the  last  and  greatest 
of  the  mineral  discoveries.  The  period  which  then  opened  has 
been  notable  particularly  on  account  of  the  large-scale  develop- 
ment of  low-grade  mineral  deposits,  although  some  rich  mines 
and  districts  have  been  opened  during  the  period.  Following 
the  use  of  the  steam-shovel  in  mining  there  began  a  search  for 
mineral  deposits,  which,  although  of  poor  quality,  were  extensive 
and  regular  enough  to  warrant  the  construction  of  large  plants 
for  mining,  handling,  and  treating  the  ores.  The  development 
of  the  Mesabi  iron  range,  of  the  so-called  "porphyry  copper 
mines",  and  of  the  low-grade  gold  deposits  of  the  West,  has 
placed  this  type  of  metal  mining  upon  a  basis  that  suggests 
comparisons  with  manufacturing  and  similar  enterprises.  The 
value  of  the  mineral  output  of  the  United  States  increased  from 
$606,476,380  in  1890  to  $2,445,805,017  in  1913." 

The  development  of  mining  has  played  an  important  part 
in  the  industrial  history  of  many  of  the  states  and  of  the  nation 

"Hewitt,  A.  S.  A  century  of  mining  and  metallurgy  in  the  United 
States,  Trans.  American  Institute  Mining  Engineers,  1876,  V,  164. 

""Mineral  Resources  of  the  United  States,  United  States  Geological 
Survey,  1913,  p.  xxii. 


557]  INTRODUCTION  27 

as  a  whole.74  In  several  states  considerable  state  revenue  has 
been  secured  from  the  mines  and  a  number  of  the  activities  of 
the  states  have  been  made  possible  on  account  of  the  revenue 
thus  derived.  Other  states  have  derived  comparatively  little 
public  revenue  from  mining  in  proportion  to  the  earnings  of 
the  industry.  In  the  succeeding  chapters  attention  will  be 
directed  particularly  to  the  problems  of  taxation  in  the  states, 
federal  taxation  receiving  attention  only  in  Chapter  II. 

T4In  addition  to  the  references  cited,  see  also  the  following  upon  the 
history  of  mining  in  the  United  States : 

Agassiz,  A.  E.  R.  Letters  and  Recollections  of  Alexander  Agas- 
siz.  Boston,  1913. 

Balch  W.  R.  Mines,  Miners,  and  Mining  Interests  in  the  United 
States  in  1882.  Philadelphia,  1882. 

Browne,  J.  Ross.  Mineral  Resources  of  the  United  States. 
Report  of  Commissioner  of  Mining  Statistics.  Washington,  1867. 
Resources  of  the  Pacific  Slope.  New  York,  1869. 
Cook,  C.  W.  Bibliography  on  salt  mining.  In  Brine  and  Salt 
Deposits  of  Michigan.  Michigan  Geological  and  Biological 
Survey.  Lansing,  1914. 

Crane,  W.  R.    Gold  and  Silver.    New  York,  1907. 
Crew,  B.   S.     A  Practical  Treatise  on  Petroleum.     Philadelphia, 
1887. 

Crowell  and  Murray.  Early  history  of  the  Lake  Superior  region. 
Chapter  I.  of  Iron  Ores  of  Lake  Superior.  2d  Ed.  Cleveland, 
1914- 

Daddow,  S.  H.  and  Bannon,  B.  Coal,  Iron,  and  Oil.  Pottsville, 
1866. 

Dickie,  G.  W.  Men  and  machinery  of  the  Comstock.  Engineering 
and  Mining  Journal,  1914,  XCVIII,  734. 

Hague,  James  D.     The  Mining  Industry.    United  States  Geologi- 
cal Exploration  of  the  Fortieth  Parallel.     Washington,  1870. 
Ingalls,  W.  R.     Chronology    of    the    gold    and    silver    industry. 
Mineral  Industry,  I.,  225.     New  York,  1892. 
Lead  and  Zinc  in  the  United  States.    New  York,  1908. 
Lippincott,  Isaac.     Industrial  effect  of  lead   in  Missouri.     Jour. 
Pol.  Econ.,  1912,  XX,  695. 

Early  salt  trade  in  the  Ohio  Valley.  Jour.  Pol.  Econ.,  1912,  XX, 
1029. 

Lord,    Eliot.     Comstock    Mining    and    Miners.      United    States 
Geological  Survey,  Monograph  IV.,  Washington,  1883. 
Mac   Farlane,  James.     The    Coal    Regions    of    America.      New 
York,  1876. 

Nicolls,  W.  J.  The  Story  of  American  Coals.  Philadelphia,  1897. 
Raymond,  R.  W.  Mining  Industry  of  the  Rocky  Mountains. 


28  MINE  TAXATION  IN  THE  UNITED  STATES  [558 

Mineral  resources  of  the  United  States.    Washington,  1873-1877. 

Rickard,    T.   A.      The   Copper  Mines   of  Lake   Superior.     New 

York,  1905. 

Schoolcraft,    H.    R.     Review   of   the   Lead   Mines   of  Missouri. 

New  York,  1819. 

Stevens,  H.  J.     Copper  Handbook.    Vol.  I.-X.     Houghton,  1900- 

1913.     (Continued  by  W.  H.  Weed.) 

Tarbell,  Ida  M.     History  of  the  Standard  Oil  Company.    2  vol. 

New  York,  1904. 

Taussig,  F.  W.    The  iron  industry  in  the  United  States,  a  survey 

of  growth.     Quart.  Jour.  Econ.,  1900,  XIV,  143,  475. 

Utley,   H.   B.   and   Cutcheon,    D.   M.     Michigan   as  a  Province, 

Territory,  and  State.     4  Vols.     New   York,    1006.      (Historical 

discussion  on  mineral  industry,  Vol.  4,  Chap.  18.) 

van   Barneveld,   C.    E.     Iron    Mining    in    Minnesota.      Bull,    i, 

Minnesota  School  of  Mines.     Minneapolis,  1912. 

Virtue,  G.  O.     Public  ownership  of  mineral  lands  in  the  United 

States.    Jour.  Pol.  Econ.,  1894,  III,  185. 

Weed,  W.  H.    Copper  Handbook.,  Vol.  XI.    Continuing  Steven's 

copper  handbook.)     Houghton,  1914. 

White,    Peter.     Mining   Industry    of  Northern   Michigan.     Ann 

Arbor,  1899. 

Whitney,     J.     D.       Metallic     Wealth     of     the     United     States. 

Philadelphia,  1854. 

Whitney,  J.  D.     Report  on  the  Upper  Mississippi  Lead  Region. 

Washington,  1862. 


CHAPTER    II 
FEDERAL  TAXATION  OF  MINES 

The  Federal  Government  derived  no  revenue  from  mines 
and  mineral  lands,  except  from  leases  and  from  the  sale  of  lands, 
until  the  first  Federal  income  tax  was  imposed  August  6,  1861.1 

Revenue  has  been  secured  at  various  times  through  internal 
revenue  taxes  upon  output,  mining  licenses,  income  taxes,  and 
the  corporation  excise  tax. 

INTERNAL  REVENUE  TAXES 

Taxes  on  mineral  products.  The  products  of  mines  have 
been  subjected  to  internal  revenue  taxes,  notably  during  the 
Civil  War.  On  July  17,  1862,  Congress  levied  upon  the  producer 
"on  all  mineral  coals,  except  such  as  are  known  in  the  trade  as 
pea  coal  and  dust  coal,  three  and  a  half  cents  per  ton,  provided, 
that  for  all  contracts  of  lease  of  coal  lands  made  before  April  1, 

1862,  the  lessee"  should  pay  the  tax.2    The  laws  of  March  3, 

1863,  amended  the  foregoing  act  and  provided  that  the  tax  on 
all  coal  mined  and  delivered  at  the  mines  on  contracts  made  prior 
to  July  1,  1862,  should  be  paid  by  the  purchasers  thereof.8    The 
rate  was  raised  to  five  cents  a  ton  on  June  30,  1864.4    By  the 
Act  of  March  3,  1865  the  rates  upon  pea  coal  were  specified5 
and  a  duty  of  one  dollar  a  barrel  was  levied  on  crude  petroleum 
or  rock-oil.e    A  tax  of  one-half  of  one  per  cent  was  levied  upon 
bullion  produced. 

Mining  license.  A  Federal  license  was  required  by  the 
Act  approved  March  3,  1865,  of  all  persons,  firms,  or  companies 
employing  others  in  mining,  providing  the  receipts  of  the  mine 
exceeded  annually  one  thousand  dollars.  The  charge  for  this 
license  was  ten  dollars.7  Under  the  Internal  Revenue  Act  of 
June  30,  1864,  as  amended  in  1866,  a  mining  company  assaying 

*I2  Statutes  at  Large  309. 

2Public  Laws  of  United  States,  37th  Cong.  2d  Sess,  Chap.  119,  Sec.  75. 
*Ibid.,  37th  Cong.  3d  Sess.,  Chap.  74- 
*Ibid.,  38th  Cong,  ist  Sess.,  Act.  146. 
6Ibid.,  38th  Cong.  2d  Sess.,  Chap.  78. 
«Ibid,  38th  Cong.  2d  Sess.,  Chap.  78. 
Chap.  78. 

29 


30  MINE  TAXATION  IN  THE  UNITED  STATES  [560 

its  own  ores  was  required  to  pay  a  special  tax  as  an  assayer. 

Corporation  excise  tax.  By  an  Act  of  August  5,  1909,  a 
special  excise  tax  was  levied  upon  the  business  of  corporations.8 
All  corporations,  joint  stock  companies,  and  associations  orga- 
nized for  profit  and  having  a  capital  stock  represented  by  shares 
were  subject  to  this  tax,  which  was  levied  ''with  respect  to  the 
carrying  on  or  doing  business."  The  rate  was  fixed  at  one  per- 
cent upon  the  entire  net  income,  over  and  above  five  thousand 
dollars,  received  from  all  sources  during  each  year  exclusive 
of  amounts  received  as  dividends  upon  stock  of  other  corpora- 
tions subject  to  the  corporation  excise  tax. 

In  addition  to  the  deductions  for  operating  expenses 
actually  paid  within  the  year  out  of  income,  necessary  charges 
for  maintenance,  losses  sustained,  and  for  depreciation  might 
be  deducted.9  Various  changes  in  the  interpretation  of  the  law 
were  made  during  the  period  it  was  in  force.10 

Several  mining  companies  claimed  that  mining  was  not  a 
"business"  in  the  sense  used  in  the  excise  law  and  an  attempt 
was  made  by  some  of  the  companies  to  recover  the  taxes  paid. 
In  Stratton's  Independence  v.  Howbert,11  the  plaintiff  claimed 
that,  "The  proceeds  of  mining  operations  result  from  a  con- 
version of  the  capital  represented  by  real  estate  into  capital 
represented  by  cash,  and  are  in  no  true  sense  income."  The 
defendant  claimed,  "The  mineral  as  it  lies  in  the  ground  is 
capital,  but  when  it  is  extracted  and  sold,  the  result  is  a  flow, 
and  income  has  accrued."  The  court,  in  discussing  the  nature 
of  mining  said,  "The  peculiar  character  of  mining  property  is 
sufficiently  obvious.  Prior  to  development  it  may  represent  to 
the  naked  eye  a  mere  tract  of  land  with  barren  surface,  and  of 
no  practical  value  except  for  what  may  be  found  beneath.  Then 
follow  excavation,  discovery,  development,  extraction  of  ores, 
resulting  eventually,  if  the  process  be  thorough,  in  the  complete 
exhaustion  of  the  mineral  contents  so  far  as  they  are  worth 
removing.  Theoretically,  the  entire  value  of  the  mine,  as 
ultimately  developed,  existed  from  the  beginning.  Practically, 
however,  and  from  a  commercial  standpoint,  the  value — that  is, 

836  Statutes  at  Large  112.    6ist  Congress,  Sess.  I.    Chap.  6,  Sec.  38. 

^Regulations  No.  31,  United  States  Internal  Revenue  Department, 
Dec.  3,  1909. 

10United  States  Treasury  Department,  T.  D.  No.  1742.  See  also 
Engineering  and  Mining  Journal,  1913,  XCV,  488. 

"231  u.  s.  403,  (1913). 


561]  FEDERAL  TAXATION  OF  MINES  31 

the  exchangeable  or  market  value — depends  upon  different  con- 
ditions. Beginning  from  little,  when  the  existence,  character 
and  extent  of  the  ore  deposits  were  problematical,  it  may  increase 
steadily  or  rapidly  so  long  as  discovery  and  development  outrun 
depletion,  and  the  wiping  out  of  the  value  by  the  practical 
exhaustion  of  the  mine  may  be  deferred  for  a  long  term  of 
years".  The  court  held:  (1)  Mining  corporations  are  not  dif- 
ferent from  other  corporations  in  the  application  of  the  law. 
(2)  The  proceeds  of  ore  sales  resulting  from  mining  operations 
conducted  on  a  corporation's  own  premises  are  income  just  as  is 
the  case  with  any  other  income.  (3)  The  value  of  the  ore  before 
being  mined  can  not  be  regarded  as  subject  to  depreciation  and 
treated  as  such.12 

The  corporation  excise  tax  was  superseded  by  the  income 
tax  of  October  3,  1913. 

INCOME  TAXES 

Civil  'War  income  tax.  On  August  6,  1861,  Congress  enacted 
a  law  providing  for  a  Federal  income  tax.13  This  act  levied  a 
tax  of  three  percent  on  all  income  in  excess  of  eight  hundred 
dollars.  It  was  repealed  and  then  re-enacted  July  1,  1862.14 
The  new  law  imposed  the  same  rate,  three  percent,  upon  the 
excess  of  income  above  six  hundred  dollars  up  to  ten  thousand 
dollars,  and  five  percent  on  the  excess  over  six  hundred  dollars 
when  the  income  exceeded  ten  thousand  dollars.  The  rates 
and  the  amount  of  exemptions  were  changed  a  number  of  times 
until  finally  by  Act  of  July  14,  1870,15  the  tax  was  discontinued 
after  1871. 

Act  of  1894.  Again  in  1894  Congress  enacted  a  law  pro- 
viding that  incomes  should  be  taxed  from  January  1,  1895,  to 
January  1,  1900.  While  this  act  never  became  effective,  it  is 
interesting  to  note  the  rules  which  were  to  control  in  determining 

12In  the  District  Court  of  Colorado  in  1912  it  had  been  held  (207 
Fed.  419)  that  the  words  "net  income"  as  used  in  the  Act  of  August  5, 
1909,  do  not  contemplate  an  allowance,  in  favor  of  a  corporation  operating 
a  mine,  for  ore  in  place  extracted  from  the  property ;  the  net  income 
being  the  value  of  what  is  extracted  after  deducting  the  cost  of  extraction 
and  treatment  and  the  cost  of  administering  the  corporation  with  a 
reasonable  reservation  for  contingencies. 

18i2  Stat.  at  Large  309. 

14Ibid,  p.  473. 

15 16  Stat.  at  Large,  257. 


32  MINE  TAXATION  IN  THE  UNITED  STATES  [562 

income  from  mines.16  Incomes  from  coal  mines  were  to  be 
reported  and  no  deductions  were  to  be  made  on  account  of  the 
diminished  value,  actual  or  supposed,  of  the  coal  vein  or  bed 
by  mining.17  The  profit  on  the  sale  of  mined  coal  was  held  to 
be  the  difference  between  the  amount  received  and  the  expense 
of  production,  excluding  all  deductions  for  the  personal  service 
of  the  miner  and  family,  plus  the  amount  paid  for  each  ton  to 
the  owner  or  lessor  of  the  mine.18  Leases  were  held  to  be  personal 
property.19  Rent  from  mines,  or  royalty,  was  held  to  be  income 
and  was  to  be  included  in  the  returns.  A  mining  claim  arising 
from  the  location  of  a  mine  on  the  public  mineral  lands  was 
held  to  be  personal  property,  and  the  difference  between  the 
actual  cost  and  the  price  received  from  the  claim  was  the  profit.20 

Act  of  1913.  In  order  to  insure  the  constitutionality  of  a 
Federal  income  tax,  a  constitutional  amendment21  was  adopted 
authorizing  Congress  to  levy  taxes  on  incomes.  On  October  3, 
1913,  Congress  enacted  an  income-tax  law,22  which  superseded 
the  special  excise  tax  on  corporations,  enacted  August  5,  1909. 
"Insofar  as  it  relates  to  the  tax  levied  against  corporations,  the 
income-tax  law  is  not  essentially  different  from  the  special  excise 
tax  law;  except  that  it  is  a  little  broader  in  its  scope  and  com- 
prehends certain  organizations  which  are  not  subject  to  the 
special  excise  tax." 

' '  As  applied  to  corporations  the  essential  differences  between 
the  old  law  and  the  new  are  these : 

1.  The  excise-tax  law  applied  only  to  corporations,  etc., 
no  matter  how  created  or  organized. 

2.  The  excise-tax  law  levied  a  tax  equivalent  to  one  per- 
cent on  the  entire  net  income  over  and  above  $5,000 ;  the  income- 
tax  law  levies  the  tax  of  one  percent  upon  the  entire  net  income, 
without  any  specific  exemption. 

3.  The  excise-tax  law  required  all  income  from  whatever 
source  to  be  returned;  the  income-tax    law    does    not    require 

"Gould,  J.  M.  and  Tucker,  G.  F.  The  Federal  Income  Tax  Explained. 
Boston,  1895. 

^Regulations  Relative  to  the  Income  Tax,  p.  31,  Washington,  1894. 
Bout.  274. 

187  Int.  Rev.  Record  60. 

197  Ibid.  59 ;  2  Ibid.  44. 

204  Ibid.  124. 

"Amendment  XVI,,  February  25,  1913. 

"38  Statutes  at  Large  114. 


563]  FEDERAL   TAXATION   OF   MINES  33 

income  from  obligations  of  the  United  States  or  of  any  State 
or  Territory  or  political  subdivision  thereof  to  be  returned  for 
taxation. 

4.  The  excise-tax  law  authorized  corporations  to  deduct 
from  gross  income  dividends  received   on    the    stock   of    other 
corporations  subject  to  the  tax,  while  under  the  income-tax  law 
such  dividends  are  not  exempt  from  the  tax  in  the  hands  of  the 
corporations  receiving  them. 

5.  Under  the  excise-tax  law  the   interest  deduction  was 
limited  to  the  amount  of  interest  actually  paid  within  the  year 
on  an  amount  of  indebtedness  not  in  excess  of  the  paid-up  capital 
stock  outstanding  at  the  close   of   the    year,    while    under   the 
income-tax  credit  may  be  taken    for    an    amount    of    interest 
actually  paid  within  the  year  on  an  amount  of  indebtedness  not 
in  excess  of  one-half  of  the  sum  of  the  interest-bearing  indebted- 
ness and  the  paid-up  capital  stock  outstanding  at  the  close  of 
the  year. 

6.  Under  the  excise-tax  law  every  corporation  subject  to 
the  tax  was  required  to  make  its  returns  on  the  basis  of  the  cal- 
endar year,  while  under  the  income-tax  law  corporations  may, 
by  properly  designating  for  this  purpose  a  fiscal  year,  make 
their  returns  on  the  basis  of  the  fiscal  year  so  established. '  '2S 

In  computing  net  income  for  the  purpose  of  the  normal 
tax  the  deductions  allowed  are  as  follows:  First,  the  necessary 
expenses  actually  paid  in  carrying  on  any  business,  not  including 
personal,  living,  or  family  expenses;  second,  all  interest  paid 
within  the  year  by  a  taxable  person  on  indebtedness;  third,  all 
national,  state,  county,  school,  and  municipal  taxes  paid  within 
the  year,  not  including  those  assessed  against  local  benefits; 
fourth,  losses  actually  sustained  during  the  year,  occurring  in 
trade  or  arising  from  fires,  storms,  or  shipwreck,  and  not  com- 
pensated for  by  insurance  or  otherwise;  fifth,  debts  due  to  the 
taxpayer  actually  ascertained  to  be  worthless  and  charged  off 
within  the  year ;  sixth,  a  reasonable  allowance  for  the  exhausting 
wear  and  tear  of  property  arising  out  of  its  use  or  employment, 
not  to  exceed,  in  the  case  of  mines,  5  percentum  of  the  gross 
value  at  the  mine  of  the  output  for  the  year  for  which  the  com- 
putation is  made,  but  no  deduction  shall  be  made  for  any 
amount  of  expense  of  restoring  property  or  making  good  the 
exhaustion  thereof  for  which  an  allowance  is  or  has  been  made ; 

Provided,  That  no  deduction  shall  be  allowed  for  any  amount 
3aAnnual  Report,  Commissioner  of  Internal  Revenue,  1914,  p.  14. 


34  MINE  TAXATION  IN  THE  UNITED  STATES  [564 

paid  out  for  new  buildings,  permanent  improvements,  or  better- 
ments, made  to  increase  the  value  of  any  property  or  estate ; 
seventh,  the  amount  received  as  dividends  upon  the  stock  or 
from  the  net  earnings  of  any  corporation,  joint  stock  company, 
association,  or  insurance  company  which  is  taxable  upon  its  net 
income. 

The  normal  tax  is  levied  upon  the  entire  net  income  of 
corporations.  In  the  case  of  mining  corporations  "a  reasonable 
allowance  for  depletion  of  ores  and  all  other  natural  deposits 
not  to  exceed  5  percentum  of  the  gross  value  at  the  mine  of  the 
output  for  the  year  for  which  the  computation  is  made".  The 
deductions  permitted  include  a  "reasonable  allowance  for 
depreciation  by  use,  wear  and  tear  of  property,  if  any. '  '24 

The  term  "gross  value"25  as  used  in  describing  a  limit  to 
the  amount  which  may  be  deducted  in  the  return  of  individuals 
and  corporations  as  depreciation  in  the  case  of  mines  is  held 
to  mean  "the  bona  fide  market  value  of  ore,  coal,  crude  oil,  and 
gas  at  the  mine  or  well,  where  such  value  is  established  by 
actual  sales  at  the  mine  or  well;  and  in  case  the  market  value 
of  the  product  of  the  mine  or  well  is  established  at  some  other 
place  than  at  the  mine  or  well,  or  on  the  basis  of  the  bullion 
or  metallic  value  of  the  ore,  then  the  gross  value  at  the  mine  is 
held  to  be  the  value  of  the  ore,  coal,  oil,  or  gas  sold,  or  of  the 
metal  produced,  less  transportation,  reduction,  and  smelting 
charges. ' ' 

"Depreciation  of  coal,  iron,  oil,  gas,  and  all  other  natural 
deposits  must  be  based  upon  the  actual  cost  of  the  properties 
containing  such  deposits.  In  no  case  shall  the  annual  deduction 
on  this  account  exceed  5  percent  of  the  gross  value  at  the  mine 
(well,  etc.)  of  the  output  for  the  year  for  which  the  compu- 
tation is  made."28 

"If  the  rate  of  5  percent  shall  return  to  the  corporation 
its  capital  investment  prior  to  the  exhaustion  of  the  deposits, 
the  rate  on  which  the  annual  deduction  for  depletion  is  based 
must  be  lowered  in  accordance  with  the  estimated  number  of 
years  it  will  take  to  exhaust  the  estimated  reserves.  In  case  the 
reserves  shall  be  in  excess  of  the  estimates  no  further  deduction 
on  account  of  depletion  shall  be  made  where  the  capital  invest- 
ment has  been  returned  to  the  corporation."27 

24Regulations  33,  U.  S.  Internal  Revenue,  January  5,  1914. 
™Ibid.,  Art.  6. 
28/&uf.,  Art  141. 
"Ibid.,  Art.  142. 


565]  FEDERAL   TAXATION   OP    MINES  35 

Corporations  leasing  oil  and  gas  lands  are  required  to 
estimate  depreciation  upon  the  cost  of  the  lease  and  not  upon 
the  estimated  value  or  production  of  the  wells.28 

" Corporations  operating  mines  (including  oil  or  gas  wells) 
upon  a  royalty  basis  only  can  not  claim  depreciation  because 
of  the  exhaustion  of  the  deposits."29  " Unearned  increment  will 
not  be  considered  in  fixing  the  value  on  which  depreciation  shall 
be  based."80 

The  United  States  Supreme  Court  held  that  a  tax  levied 
on  a  mining  corporation  under  the  income-tax  law  of  1913  is 
not  a  direct  tax  on  property  but  is  a  true  excise  levied  on  the 
business  of  carrying  on  mining  operations.  It  was  claimed 
that  when  adequate  allowance  is  not  made  for  the  exhaustion 
of  the  ore  body,  the  tax  really  falls  upon  the  property.81 

In  interpreting  the  Federal  corporation  tax,  the  Court  of 
Appeals  held  that  when  royalty  is  paid  annually  in  "fixed 
amounts  per  ton  of  all  ore  taken"  or  as  a  stipulated  minimum 
amount  whether  the  ore  was  taken  or  not,  the  transaction  is  in 
effect  the  sale  of  the  ore  and  the  royalties  are  in  fact  the  purchase 
price  of  the  ore.  The  amounts  paid  under  the  name  of  royalties 
for  the  ore  taken  cannot  be  called  or  classed  as  income,  but 
must  be  regarded  as  parts  of  the  capital  of  the  .corporation,  as 
the  lessor  from  the  ores  to  the  royalties  and  claims  to  the  pur- 
chase price  of  such  ore,  which  the  lessee  covenanted  to  and  did 
pay  under  the  name  of  royalties,  and  such  sums  are  not  subject 
to  the  United  States  corporation  tax  act.82 

Act  of  1916.  The  law  of  1913  was  amended  in  1916  and 
among  the  changes  made  were  several  that  have  an  important 
effect  upon  the  mining  industry.  The  rate  is  continued  at  two 
percent  of  the  net  income  of  corporations,  joint  stock  companies, 
and  associations.  The  deductions  permitted  include  "a  reason- 
able allowance  for  the  exhaustion,  wear  and  tear  of  property 
arising  out  of  its  use  of  employment  in  the  business  or  trade ; 

(a)  in  the  case  of  oil  and  gas  wells  a  reasonable  allowance  for 
actual  reduction  in  flow  and  production  to  be  ascertained  not  by 
the  flush  flow,  but  by  the  settled  production  or  regular  flow; 

(b)  in  the  case  of  mines  a  reasonable  allowance  for  depletion 

26Ibid.,  Art.  144.  • 

29Ibid.,  Art  145. 

»°/Wrf./Art  146. 

"Stanton  v.  Baltic  Mining  Co.,  240  U.  S.  103,  (1916). 

•2von  Baumbach  v.  Sargent  Land  Co.,  219  Fed.  31,  (1914)- 


36  MINE  TAXATION  IN  THE  UNITED  STATES  [566 

thereof  not  to  exceed  the  market  value  in  the  mine  of  the  pro- 
duct thereof  which  has  been  mined  and  sold  during  the  year 
for  which  the  return  and  computation  are  made,  such  allowance 
to  be  made  in  the  case  of  both  (a)  and  (b)  under 
rules  and  regulations  to  be  prescribed  by  the  Secretary  of  the 
Treasury:  Provided,  that  when  the  allowance  authorized  in 
(a)  and  (b)  shall  equal  the  capital  originally  invested,  or  in  case 
of  purchase  made  prior  to  March  1,  1913,  the  fair  market  value 
as  to  that  date,  no  further  allowance  shall  be  made."33 

33Act  of  1916,  sec.  12. 


CHAPTER   III 
HISTORY  OF  MINE  TAXATION  IN  THE  STATES 

The  general  property  tax  was  firmly  established  in  the 
American  colonies1  before  mining  was  developed  as  an  important 
industry.  As  has  been  noted  previously,  in  a  number  of  the 
states  special  concessions  were  granted  in  order  to  encourage  the 
rapid  development  of  the  resources,  the  mines  being  considered 
essentially  as  contributors  to  industrial  activity  rather  than  as 
sources  of  public  revenue. 

There  is  practically  no  mention  of  the  methods  of  assessing 
and  taxing  mines  in  the  state  histories  of  taxation  for  the  period 
prior  to  1840.  As  the  mineral  deposits  were  opened  and  as  the 
earnings  from  mines  increased  the  older  states  applied  the  exist- 
ing tax  laws  to  mines.  In  1846,  Michigan  departed  from  the 
common  practice  of  applying  only  the  general  property  tax  to 
mines  by  levying  a  specific  tax  as  a  percentage  upon  the  gross 

1The  property  tax  was  the  leading  form  of  direct  levy  in  all  the 
proprietary  provinces.  (Osgood,  The  American  Colonies  in  the  Seven- 
teenth Century,  II,  349).  Maryland  levied  on  property  first  in  1654  and 
regularly  after  1666.  (Maryland  Archives  Assembly  1666,  p.  235.)  In 
South  Carolina  the  property  tax  appeared  first  in  1682.  In  1683  New  York 
began  regularly  the  system  of  a  penny  in  the  pound  of  the  value  of  all 
property.  (Orders  and  Warrants,  M.  S.,  1674-1685,  p.  108;  Schwab,  His- 
tory of  the  New  York  property  tax,  Publications  of  the  American  Eco- 
nomic Association,  V,  5).  Ability  as  measured  by  the  ownership  of  prop- 
erty came  to  be  the  basis  of  taxation  in  New  England.  In  1634,  Massa- 
chusetts adopted  the  policy  of  levying  taxes  according  to  the  estates  held. 
(Douglas,  Financial  History  of  Massachusetts,  p.  18).  The  property  tax 
was  developed  later  in  Virginia  and  in  a  different  form.  (Ripley,  Finan- 
cial History  of  Virginia,  Columbia  University  Studies  in  Political  Science, 
1893,  IV,  18). 

See  also  the  following: 

Madison,  James.  Territorial  taxation  of  land.  Executive  Documents, 
7th  Congress,  ist  Session,  January  14,  1802. 

Wolcott,  Oliver,  Sec.  Systems  of  taxation  now  prevailing  in  the 
several  states.  Ibid.,  4th  Cong.,  2d  Sess.,  Dec.  14,  1796. 

Report  reviewing  methods  of  state  taxation,  American  State  Papers 
No.  7,  Finance  No.  i.  House  Document  too,  4th  Congress,  2d  Session, 
Dec.  14,  1796. 

37 


38  MINE  TAXATION  IN  THE  UNITED  STATES  [568 

value  of  the  products  of  the  iron  and  copper  mines.  In  1853  the 
Michigan  legislature  first  imposed  a  tonnage  tax  on  coal,  iron 
ore,  and  smelted  copper  or  copper  mineral.  Pennsylvania,  using 
the  general  property  tax,  began  at  an  early  date  to  recognize 
mineral  rights,  separate  from  the  land,  as  a  form  of  property 
subject  to  taxation.  The  courts  definitely  approved  the  prac- 
tice in  1857. 

Some  of  the  mining  states  and  territories  of  the  West  fol- 
lowed the  experience  of  the  Eastern  states  in  framing  their 
state  tax  laws.  The  general  tax  laws  were  applied  to  the  mines 
in  California,  Washington,  Oregon,  North  Dakota,  and  South 
Dakota.  But  in  the  other  Western  states  attempts  have  been 
made  to  devise  special  systems  of  taxation  for  mines. 

Prior  to  the  enactment  of  the  Federal  mining  laws,  the 
miners  established  local  mining  districts  with  their  own  local 
laws  and  local  government.  Some  public  revenue  was  necessary. 
In  the  year  1861  the  miners  in  a  district  of  what  is  now  Boulder 
County,  Colorado,  then  Nebraska  Territory,  levied  a  tax  at  a 
uniform  rate  per  mining  claim.  The  same  system  was  adopted 
by  other  Western  mining  districts.  The  records  of  the  Gold 
Hill  District  in  Colorado  show  that  on  October  2,  1861,  a  reso- 
lution was  adopted  in  opposition  to  "any  system  of  taxation 
of  quartz  or  other  mining  claims  having  anything  to  do  with  the 
books  or  with  the  recording  of  claims.2 ' ' 

In  1862,  three  years  after  the  Comstock  Lode  was  discov- 
ered, Nevada  inaugurated  the  system  of  taxing  the  proceeds  of 
mines.  The  state  retained  four-tenths  of  the  revenue  derived 
and  the  remainder  was  distributed  among  the  counties.3 

Arizona,  in  1864,  gave  the  mining  companies  the  option  of 
paying  a  tax  on  general  property  or  an  annual  tax  on  net  pro- 
ceeds and  fifty  cents  per  one  hundred  dollars  valuation  of  real 
estate.  However,  in  1866  Arizona  repealed  the  law  of  1864 
and  taxed  mining  companies  on  invested  capital  and  capital 
stock,  but  re-enacted  the  proceeds  tax  in  1871.  In  1881  Arizona 
again  returned  to  the  general  property  tax  for  taxing  mines. 

Maryland  attempted  to  collect  a  tonnage  tax  on  coal  in 
1874,  but  the  law  was  held  unconstitutional  as  being  in  restraint 
of  interstate  commerce,  for  it  required  the  payment  of  the  tax 
by  the  transportation  companies.4 

2Tenth  Census,  1880,  XIV,  p.  352. 

aLaws  of  Nevada,  1862,  p.  131. 

4State  v.  Cumberland  &  P.  R.  Co.,  40  Maryland  22. 


569]  HISTORY  OF   STATE  TAXATION  39 

The  Michigan  tonnage  tax  was  declared  unconstitutional  in 
1875  as  being  in  restraint  of  interstate  commerce;  it  discrimi- 
nated between  ore  smelted  in  the  state  and  that  shipped  to 
smelters  outside  the  state.5  The  tonnage  law  entire  was  repealed 
in  1891. 

Minnesota  collected  a  tonnage  tax  from  iron  mines  from 
1881  to  1896,  at  which  time  the  state  law  was  declared  unconsti- 
tutional. 

After  having  exempted  mines,  Colorado  in  1887  imposed  a 
tax  upon  mines  on  a  valuation  based  on  the  gross  proceeds. 

There  seems  to  have  been  a  tendency  in  the  Rocky  Mountain 
states  to  tax  only  profitable  mines  and  to  lay  whatever  burden 
was  apportioned  to  the  mining  industry  of  a  state  or  of  a 
district  upon  the  successful  mines,  entirely  exempting  the  devel- 
oping and  the  unprofitable  mines.  A  number  of  the  states  have 
taxed  the  possessory  right  to  unpatented  claims  upon  Federal 
and  state  lands  and  have  also  levied  a  tax,  under  the  general 
property  tax  laws,  upon  all  improvements  upon  unpatented 
claims  and  unprofitable  mines. 

Mining  corporations  have  usually  been  subject  to  the  same 
fees,  licenses,  and  corporation  taxes  as  corporations  chartered 
for  other  purposes. 

In  reviewing  the  tax  history  of  a  number  of  states  that 
have  used  the  general  property  tax  there  is  little  to  note  that 
has  been  distinctive  of  the  experience  of  these  states  in  dealing 
with  the  mining  industry  when  compared  with  the  taxation  of 
other  industries  and  the  property  used  in  these  industries.  In 
the  following  section,  there  is  given  a  review  of  the  experience 
o£  a  number  of  the  states  that  have  had  special  problems  to 
solve  or  that  have  employed  methods  other  than  the  general 
property  tax. 

ARIZONA 

Arizona  contains  important  mineral  deposits  and  mining 
is  one  of  the  leading  industries  of  the  state,  the  output  of  the 
mines  being  valued  at  $67,497,838  in  1912,  $71,429,705  in  1913, 
and  $60,391,272  in  1914.6 

It  is  reported  that  there  was  some  primitive  mining  within 
the  boundaries  of  Arizona  as  early  as  1650,  particularly  in  Pima 
County.  Gold  was  discovered  in  the  Santa  Rita  Mountains  in 
1769.  During  the  period  from  1855  to  1863  mining  did  not 

6Jackson  M.  Co.  v.  State  Auditor,  32  Michigan  488. 
^Mineral  Resources  of  the  United  States,  1914,  p.  32*. 


40  MINE  TAXATION  IN  THE  UNITED  STATES  [570 

develop  rapidly  owing  to  trouble  with  the  Indians  and  lack  of 
transportation  facilities.7  In  1864  mines  were  taxed8  as  other 
property,  but  were  permitted  to  pay  instead  of  such  taxes  an 
annual  tax  of  five  percent  upon  the  net  proceeds  and  fifty  cents 
per  one  hundred  dollars  of  value  of  real  estate  owned.  In  1866 
the  law  of  1864  was  repealed  and  mining  companies  were  taxed 
on  invested  capital  and  capital  stock.  By  an  act  of  December 
15,  1868,  all  mining  companies  were  relieved  from  the  payment 
of  taxes  in  1868  beyond  those  assessed  on  their  real  and  personal 
estate  within  the  territory.  The  law  of  1871  specified  mines  or 
possessory  rights  as  real  estate.9 

A  tax  on  net  proceeds  of  mines  was  enacted  February  4, 
1875.10  In  determining  the  gross  proceeds  deductions  for  oper- 
ating expenses  were  to  be  made  but  not  to  exceed  90  percent 
of  the  gross  value  of  the  ore  when  such  gross  value  was  between 
thirty  and  sixty  dollars  per  ton.  Not  over  eighty  percent  might 
be  deducted  from  the  gross  value  of  ore  worth  sixty  to  one 
hundred  dollars;  not  over  sixty  percent  on  ores  of  one  hundred 
to  two  hundred  dollars  gross  value;  and  not  to  exceed  forty 
percent  on  ores  worth  more  than  two  hundred  dollars ;  an  added 
deduction  of  twenty  dollars  per  ton  was  allowed  on  all  ores, 
that  were  roasted  before  reduction,  and  all  ores  valued  at  less 
than  thirty  dollars  were  exempt  from  taxation. 

By  an  Act  of  February  9,  1877,  the  levy  was  made  two- 
percent  upon  the  net  proceeds,  twenty-five  percent  of  the  revenue 
went  to  the  territory  and  the  remainder  to  the  county.11 

The  law  of  1875,  taxing  net  proceeds,  was  repealed  in  1881 
and  mining  companies  were  taxed  under  the  same  laws  that 
applied  to  other  corporations.12 

The  revised  statutes  of  1901  specify  that  the  term  land  as 
used  in  the  section  of  the  law  of  taxation  "shall  not  be  so  con- 
strued as  to  include  mining  claims  either  lode  or  placer".13 
During  this  period  there  was  a  general  impression  that  mines 
were  not  paying  their  full  share  of  taxation  and  in  1903  the 
Governor  of  Arizona  stated  that  the  mining  industry  was 

7For  the  history  and  geology  of  mining  districts  of  Arizona  see  U.  S.. 
Geological  Survey,  Professional  Papers  12,  21,  and  43. 
8Arizona  was  organized  as  a  territory  Feb.  24,  1863. 
gLaws  of  Arizona,  1871,  Act  of  Feb.  18,  sec.  5. 
10Ibid.,  1875,  Act  of  Feb.  4. 
^Compiled  Laws  of  Arizona,  1877,  p.  354. 
12Laws  of  Arizona,  p.  137. 
18Revised  Statutes,  1901,  sec.  3835. 


571]  HISTORY   OF    STATE   TAXATION  41 

allowed  to  escape  its  proper  valuation  and  that  a  just  and 
equitable  assessment  and  taxation  of  the  producing  mine  would 
not  work  a  hardship  on  the  mines  as  all  would  then  bear  their 
share  and  the  tax  rate  could  be  reduced.14 

In  1907  the  legislature  again  enacted  a  law  which  provided 
for  the  taxation  of  mines  according  to  their  production.15  Mines 
were  divided  into  two  classes,  (1)  productive  and  (2)  unpro- 
ductive. All  claims  that  produced  $3750  or  more  during  the 
year,  and  groups  of  claims  belonging  to  the  same  owner  that 
have  produced  $3750  or  more  per  claim  were  included  in  the 
class  of  productive  mines.  The  second  class  included  all  mines 
and  mining  claims  not  in  the  first  class.  All  mines  in  this  class 
were  taxed  as  other  property.  Unpatented  mines  or  mining 
claims  which  were  unproductive  were  exempt  from  taxation  ex- 
cept the  improvements,  which  in  all  cases  were  taxed. 

Owners  of  productive  mines  of  the  first  class  were  required 
to  report  under  oath  the  tonnage  and  market  value  of  the  ore 
produced.  The  assessor  was  required  to  determine  the  gross 
value  of  the  output  "on  the  average  market  quotation  of  each 
such  metal  in  New  York  City  and  25  percent  of  the  gross  value 
in  money"  was  taken  as  constituting  the  total  amount  from 
which  the  levy  of  taxes  for  the  current  year  was  made.  No 
other  tax  was  levied  upon  mines  in  this  class  except  a  property 
tax  on  machinery,  equipment,  and  personal  property.  When  the 
surface  of  mining  claims  was  used  for  other  than  mining  pur- 
poses, it  was  taxed  in  the  same  manner  as  other  surface  property 
similarly  used.16 

Governor  R.  E.  Sloan,  in  an  address  made  at  the  second 
meeting  of  Governors17  defended  the  system  of  assessing  and 
taxing  mines  then  operative  in  Arizona  on  the  ground  that  few 
mines  were  sold  and  the  market  value  of  mines  could  not  readily 


of  Governor,  1903,  p.  13. 

16Laws  of  Arizona,  1907,  chap.  20,  p.  23. 

"The  Phoenix  correspondent  of  the  Engineering  and  Mining 
Journal  commented  upon  this  law  as  f  olows  :  "Generally,  the  law  has 
been  considered  fair  and  reasonable,  although,  as  is  the  case  with  any 
application  of  the  gross  output  for  a  taxation  standard,  the  low-grade 
mines  pay  out  of  proportion  to  the  high-grade  mines,  considering  net 
earnings  as  the  actual  value  standard  of  any  operation.  Apparently  the 
mine  owners  are  not  dissatisfied  with  the  form  or  substance  of  the 
present  law."  Engineering  and  Mining  Journal,  1912,  XCIII,  500. 

"Proceedings  of  Second  Meeting  of  Governors,  Washington,  1910, 
p.  146. 


42  MINE  TAXATION  IN  THE  UNITED  STATES  [572 

be  determined  by  assessors  who  were  without  the  means  of  deter- 
mining their  value  by  actual  examination  and  test.  He  re- 
ported that  in  1910  the  method  in  use  met  with  "general 
approval"  although  when  the  system  was  adopted  in  1907 
"there  was  much  and  strong  opposition"  to  it. 

On  April  30,  1912,  the  law  of  1907  was  repealed  and  mines 
were  then  taxed  as  other  property  upon  an  ad  valorem  basis.18 
In  1912  the  Tax  Commission  increased  the  assessed  valuation 
of  mines  from  $14,000,000  to  $32,000,000.  Two  members  of  the 
Tax  Commission  advised19  the  adoption  of  a  law  providing  for 
a  classification  of  mines  and  assessment  according  to  both  the 
gross  and  the  net  value  of  the  output.  These  two  commissioners 
favored  a  valuation  upon  an  ad  valorem  basis  if  the  system  of 
valuation  upon  gross  and  net  output  was  not  adopted.  The 
third  commissioner  preferred  valuation  and  taxation  upon  an 
ad  valorem  basis  but  for  the  time  favored  "a  graduated  tax 
on  the  producing  mines".  In  1913  the  Arizona  legislature 
enacted  a  law  providing  for  the  valuation  of  mines  according 
to  the  gross  and  net  output.20  The  law  was  in  force  only  two 
years  as  specified  in  the  act.  This  act  classified  mining  property 
as  (1)  producing  mines  and  mining  claims  and  (2)  non-pro- 
ducing mines  and  mining  claims,  which  included  all  mining 
property  not  in  class  1. 

Producing  mines  and  mining  claims  were  defined  to  be 
those  which,  after  deducting  the  expenses  of  operation  and  such 
other  expenses  as  were  permitted  by  the  Act,  yielded  net  pro- 
ceeds, or  a  number  of  claims  worked  under  one  ownership,  any 
one  or  all  of  which  after  deducting  the  expenses  of  operation 
and  such  other  expenses  as  were  permitted,  yielded  net  proceeds. 

The  Tax  Commission  determined  the  gross  product  and  the 
net  proceeds.  The  mining  companies  made  annually  a  certified 
statement  to  the  Tax  Commission  and  upon  the  data  thus  se- 
cured, the  gross  value  of  the  product  was  determined.  The 
prices  used  were  based  on  New  York  quotations  for  the  year 
covered  by  the  report.  The  net  proceeds  were  determined  by 

18Laws  of  Arizona,  1912,  p.  124.  The  constitution  provides  that  "the 
manner,  method,  and  mode  of  assessing,  equalizing,  and  levying  taxes 
in  the  state  of  Arizona  shall  be  such  as  may  be  prosecuted  by  law." 
Constitution,  Art.  IX.,  sec.  II. 

i9Special  Report  of  State  Tax  Commission  of  Arizona  on  Mining 
Taxation,  1913.  pp.  6,  8,  and  16. 

^Revised  Statutes  of  Arizona,  1913,  sec.  4980-4994. 


573]  HISTORY   OF    STATE   TAXATION  43 

subtracting  from  the  gross  the  following:  ''All  moneys  spent 
for  necessary  labor,  machinery,  and  supplies  needed  and  used 
in  the  mining  operations,  for  betterments  necessary  in  and 
about  the  workings  of  the  mine,  for  the  treatment  and  reduction 
of  ores,  for  the  repair  and  betterment  of  mills  and  reduction 
works  used  and  operated  in  connection  with  the  mine,  for  trans- 
porting the  ore  and  the  conversion  of  the  products  into  money 
or  its  equivalent."  Such  expenditures  were  not  to  include 
"money  invested  as  the  purchase  price  of  the  mine,  in  real 
estate  or  the  construction  of  new  mills  or  reduction  works,  nor 
the  salaries  or  any  portion  thereof,  of  any  persons,  agent  or 
officers  not  actually  and  consecutively  engaged  in  working  the 
mine  or  in  personally  superintending  the  management  thereof 
within  the  state  of  Arizona". 

Mines  were  valued  by  the  Commission  at  four  times  the  net 
proceeds  plus  one-eighth  of  the  gross.  Upon  this  valuation  there 
was  levied  the  same  rate  as  was  applied  to  property  in  general. 
All  mines  not  having  net  proceeds  were  taxed  as  was  other  real 
estate.  Improvements  of  all  kinds  upon  both  producing  and 
non-producing  mines  or  claims  were  not  exempted  from  taxa- 
tion. The  law  specified  that  nothing  in  the  act  should  be  ' '  taken 
or  construed  to  be  a  tax  on  either  the  gross  or  net  proceeds  of 
earnings,"  the  purpose  of  the  act  being  simply  to  secure  a  basis 
for  valuation. 

In  1911  the  mines  paid  19.3  percent  of  the  state  taxes;  in 
1912,  31.7  percent;  and  in  1913,  37.2  percent.22 

There  was  introduced  in  the  Second  Legislature,  1915,  a 
bill23  providing  for  the  assessment  and  taxation  of  mines  upon 
practically  the  same  basis  as  specified  in  the  Act  of  1913.  How- 
ever the  gross,  according  to  the  bill,  would  have  been  computed 
upon  the  average  New  York  price  of  metals  for  the  preceding 
ten  years.  This  bill  failed  to  pass  and,  no  other  legislation 
having  been  enacted,  mines  will  be  taxed24  as  other  property.25 

Z2Second  Biennial  Report,  Arizona  State  Tax  Commission,  1914,  p.  12. 

"Senate  Bill  15. 

24See  Chap.  VII  for  the  plan  of  appraisal  employed  by  the  Arizona 
Tax  Commission  in  1916. 

^Miscellaneous  references  on  mine  taxation  in  Arizona: 
Zander,  C.  M.    Problems  and  progress  in  Arizona.    Proc.  Nat.  Tax  Assn.f 

1914,  VIII,  122. 

Taxation  of  metalliferous  mines.    Ibid.,  338. 

Taxation  of  non-producing  patented  mines.    Proceedings  Territo- 
rial Board  of  Equalization,  Arizona,  August,  191 1,  pp.  3-6. 


44  MINE  TAXATION  IN  THE  UNITED  STATES  [574 

COLORADO26 

Colorado  has  been  an  important  producer  of  minerals  for 
many  years.  It  is  reported  that  gold  was  found  on  Cherry 
Creek  near  Denver  in  1849,  but  the  real  mining  began  with  the 
discoveries  of  gold  in  the  Clear  Creek  District  in  1858  and  1859. 

The  early  records27  of  the  mining  districts  show  that  before 
Colorado  was  organized  as  a  territory,  the  local  rules  provided 
for  minor  forms  of  taxation  such  as  road  taxes  at  a  flat  rate 
per  mining  claim.  Output  taxes  were  not  favored  in  the  early 
days.28  The  State  Constitution  provided29  that  for  a  period  of 
ten  years  from  July  1,  1876,  mines  should  be  exempt  from  taxa- 
tion except  the  net  proceeds  and  surface  improvements.  The 
constitution  specified  also  that  the  general  assembly  should 
provide  general  laws  for  assessing  property  and  collecting  taxes. 
As  the  legislature  failed  to  enact  any  laws  for  the  taxation  of 
mines  until  April  4,  1887,  there  was  no  authority  for  collecting 
taxes  based  upon  either  the  net  proceeds  and  the  actual  value 
of  the  improvements  or  the  mines.  Attempts  were  made,  nota- 
bly in  Lake  County,  to  force  the  mines  to  pay  some  taxes.  In 
Stanley  v.  Little  Pittsburg  Mining  Company30  it  was  held  by 
the  court  that  locally  mines  could  not  be  taxed  until  the  legis- 
lature had  provided  machinery  for  carrying  out  the  permission 
and  instructions  of  the  constitution.  In  1882  the  legislature 
enacted  a  bill  providing  for  the  assessment  of  mines  and  for 
ascertaining  the  net  proceeds  but  the  act  was  vetoed  by  the 
Governor.  On  April  4,  1887,  the  Colorado  legislature31  enacted 

Unsigned  articles  and  notes. 

Engineering  and  Mining  Journal,  1886,  XLII,  26;  1910,  XC,  449; 
1912,  XCIII,  500;  1913,  XCV,  1069;  1913,  XCVI,  346. 

Mining  and  Scientific  Press,  1912,  CV,  816 ;  1913,  CVI,  505,  804,  1003 ; 
1916,  CXIII,  141. 

Mining  Science,  LVII,  17. 

Mining  and  Engineering  World,  1914,  XL,  635. 

26Organized  as  a  territory  February  28,  1861,  and  admitted  to  the 
Union  August  i,  1876. 

27Raymond,  R.  W.  Historical  Sketch  of  Mining  Law.  Mineral 
Resources  of  the  United  States,  1883-1884,  pp.  988-1004. 

28The  Gold  Hill  District,  Boulder  Co.,  went  on  record  October  2,  1861 
as  opposing  a  tax  system  which  required  an  inspection  of  books. 

29Art.  X,  sec.  3. 

«<>6  Colorado  416,  (1882). 

81In  1886  the  Colorado  Supreme  court  was  asked  by  the  State  Legis- 
lature to  render  an  opinion  in  regard  to  the  constitutionality  of  certain 


575]  HISTORY  OF   STATE   TAXATION  45 

laws  providing  for  the  taxation  of  mines  previously  exempt 
under  the  constitution.32  By  these  laws33  no  mines  or  mining 
property  were  exempt  from  taxation  and  producing  mines, 
having  an  output  exceeding  in  value  $1000,  were  to  be  assessed 
at  one-fifth  of  the  gross  proceeds  to  be  determined  by  the 
assessor.  Unpatented  claims  were  taxable  upon  the  same  basis, 
the  right  of  possession  being  recognized  as  the  object  of  the 
assessment. 

Prior  to  the  Act  of  1887,  mines  paid  no  taxes  except  upon 
surface  improvements.  This  act  continued  in  force  until  1902 
when  a  new  law  was  enacted34  which  for  the  purpose  of  asses- 
ment  and  taxation  classified  mining  property  as  producing  and 
non-producing.  When  the  gross  value  of  the  product  exceeded 
five  thousand  dollars,  the  property  was  classed  as  producing; 
if  less  than  five  thousand  dollars  it  was  classed  as  non-producing. 
A  certified  annual  statement  of  output  and  operating  expenses 
was  required  from  all  mining  companies.  Net  proceeds  were 
determined  by  deducting  from  the  gross  the  actual  cost  of  min- 
ing, transporting,  and  treating  the  ore.  The  value  of  the  mine 
was  fixed  at  one-fourth  of  the  gross  unless  the  net  exceeded  this 
amount  in  which  event  an  amount  equal  to  the  net  proceeds  was 
taken  as  the  value  of  the  property. 

The  assessor  was  instructed  that  he  should  not  assess  a 
non-producing  mining  claim  at  a  greater  sum  per  acre  than 
was  assessed  against  the  lowest  producing  mine  or  mining  claim 
situated  in  the  same  locality.35  Possessory  rights  to  mining 
claims  were  taxable.  Surface  improvements  were  valued 
separately  and  taxed  at  their  full  cash  value.  Mines  of  coal, 
iron,  asphaltum,  quarries,  and  lands  valuable  for  other  metals, 
minerals  or  earths  were  assessed  and  taxed  as  other  property. 

In  1913  important  changes  were  made  again.36  Under  the 
law  of  1913,  producing  mines  and  mining  claims  were  valued 

proposed  measures  providing  for  the  assessment  and  taxation  of  mines. 
The  several  proposed  measures  attempted  to  fix  by  law  the  actual  amount 
at  which  mining  claims  should  be  assessed.  In  the  opinion  of  the  court 
(9  Colo.  623)  the  assessing  of  property  was  delegated  to  certain  officers 
and  was  not  to  be  attempted  by  the  state  legislature. 

32Art.  X,  sec.  3. 

™J.au>s  of  Colorado,  1887,  p.  340. 

**Ibid.,  1902,  p.  79,  sec.  81,  par.  3883. 

35 1 bid.,  sec.  3891. 

^Colorado  Session  Laws,  1913,  chap.  139  amending  sec.  5619-5626  of 
Revised  Statutes,  1908. 


46  MINE  TAXATION  IN  THE  UNITED  STATES  [576 

at  a  sum  equal  to  one-half  of  gross  proceeds  plus  all  the  net 
proceeds. 

There  was  considerable  dissension  over  the  definition  of 
gross  proceeds  as  used  in  the  law.  On  November  16,  1913,  the 
Colorado  District  Court  defined  "gross  proceeds"  as  "the 
amount  of  money  received  after  deducting  freight  and  treat- 
ment charges".37 

However,  this  definition  of  gross  proceeds  was  modified  by 
the  decision  on  the  rehearing,  March  2,  1914.  The  court  held 
the  gross  proceeds  of  a  mine  to  be  the  sum  received  by  its  owner 
from  the  sale  of  his  ore  at  the  mine.  When  the  ore  is  not  sold 
at  the  mine  this  construction  necessitates  the  deduction  of  all 

In  passing  upon  the  constitutionality  of  the  Colorado  law39 
of  1913  the  Supreme  Court  of  Colorado  said,40  after  reviewing 
the  history  of  mine  tax  laws  in  Colorado :  ' '  The  legislature  did 
not  intend  that  the  fractions  mentioned  in  these  different  stat- 
utes should  arbitrarily  represent  the  net  proceeds,  as  in  the  Act 
transportation,  reduction  and  treatment  charges  in  order  to 
arrive  at  the  gross  proceeds.38 

37The  difficulty  arose  on  account  of  conditions  in  the  Cripple  Creek 
District.  Some  of  the  mines  sold  the  gold  ore  to  local  ore-buyers,  others 
shipped  to  mills  and  smelters  outside  the  district,  and  others  treated  the 
ore  locally  in  their  own  plants.  The  mine  operator  who  sold  ore  received 
as  "gross  proceeds"  from  the  ore-buyer  an  amount  which  was  the  "net" 
after  the  treatment,  transportation,  and  other  charges  were  deducted. 
The  question  then  was  whether  "gross"  should  mean  the  actual  value  of 
the  recoverable  gold  in  the  ore,  or  the  real  sale  price  (for  the  operator) 
of  the  ore.  In  commenting  on  this  situation  a  member  of  the  Colorado 
Tax  Commission  said :  "We  recommended  to  the  legislature  the  bill 
changing  the  assessment  to  50  percent  of  the  gross  and  all  of  the  net 
from  the  metalliferous  mines.  The  supreme  court  had  defined  gross, 
and  then  later  on  changed  the  definition  anad  made  it  mean  the  sum 
received  by  the  owner  from  the  sale  of  his  ores.  The  result  of  this 
decision  makes  it  necessary  to  deduct  the  transportation,  reduction  and 
treatment  charges  so  that  the  consequence  has  been  a  considerable  reduc- 
tion in  the  valuation  of  the  mining  counties.  This,  of  course,  throws 
the  burden  of  taxation  onto  other  property  in  those  counties.  Somewhere 
between  8  and  10  millions  of  dollars  of  valuation  were  lost,  I  believe 
this  year."  J.  B.  Phillips  in  "Legislative  and  administrative  problems  in 
Colorado",  Proc.  Nat.  Tax  Assn.,  1914,  VIII.,  96. 

88Paxson  v.  Cresson  Consolidated  G.  M.  Co.,  139  Pacific  531,  (1914). 

MLaws  of  Colorado,  1913,  p.  566,  sec.  2. 

40Tallon  v.  Vindicator  Consolidated  Gold  Mining  Co.,  149  Pacific  108, 
(I9IS). 


577]  HISTORY   OF   STATE   TAXATION  47 

of  1902  it  provided  that  the  net  proceeds  should  be  taxed  only 
if  it  exceeded  one-fourth  the  gross  proceeds,  and  the  act  pro- 
vides the  gross  proceeds  shall  be  obtained  by  deducting  the  cost 
of  transportation  and  treatment,  and  the  net  proceeds  shall  be 
ascertained  not  by  an  arbitrary  fraction  of  the  gross  but  by 
deducting  from  the  gross  the  cost  of  reduction,  and  then  that 
a  fraction  of  the  gross  plus  all  the  net  obtained  in  this  way 
shall  be  a  sum  equal  to  the  value  of  the  mine  for  taxation ;  and 
while  the  legislature  could  not  say  that  one-half  the  gross  pro- 
ceeds plus  all  the  net  in  fact  equals  the  value  of  the  mine,  yet 
it  could  lawfully  say  that  the  amount  so  determined  should 
represent  the  value  of  the  mine  for  taxation,  and  in  this  way 
it  provides  a  rule  for  arriving  at  the  value  of  producing  mines 
for  taxation  and  is  constitutional." 

The  Legislature  of  1915  changed  the  law  of  1913  and  now 
all  producing  metal  mines  are  valued  for  taxation  at  one-fourth 
of  their  gross  production  unless  their  net  output  exceeds  one- 
fourth  of  the  gross  in  which  case  the  net  is  taken.  If  any 
number  of  contiguous  claims,  owned  or  operated  as  one  property 
by  the  same  person,  persons,  association  or  corporation,  have 
a  gross  production  in  excess  of  $5000  per  annum,  the  property 
is  considered  as  one  producing  mine  and  taxed  as  such  under 
the  existing  law.41 

The  assessed  valuation42  of  the  metal  mining  property  dur- 
ing the  years  1912,  1913,  1914,  and  1915  f ollows : 

1912  1913  1914  1915 

Assessed  valuation $18,012,830      $46,042,067      $41,468,531      $32,945,057 

Percent  of  total  valua- 
tion  of   state 4.27  3.52  3.17  2.64 

In  the  fifteen  principal  mining  counties  of  the  state  the 
valuations  during  the  years  1912,  1913,  1914,  and  1915  have 
been  as  follows:43 

Mining  property    All  other  property 

Assessed  value   1912 $17,896,172  $  36,947,647 

1913 43,546,803  109,446,426 

1914- 38,355,744  107,446,395 

1915 30,479,507  104,513,582 

Additional  data  on  Colorado  may  be  found  in  the  references 
given  below.44 

41  Ibid.,  1915,  chap.  138. 

424th  Annual  Report,  Colorado  Tax  Commission,  1915,  p.  32. 
*3lbid.,  p.  22. 

44Brownlee,   A.    G.     System    of   taxing   mining   properties.     Mining 
World,  1910,  XXXIII,  609. 


48  MINE  TAXATION  IN  THE  UNITED  STATES  [578 

IDAHO45 

Although  gold  was  discovered  on  the  Pen  d'Orielle  River 
in  1852,  extensive  gold  mining  did  not  begin  in  Idaho  until  the 
following  decade.  Today,  Idaho  is  famous  particularly  for  lead- 
silver  mines  and  mines  of  this  character  were  not  opened  until 
1873.46 

In  1866  Idaho  Territory  first  enacted  laws  regulating  min- 
ing locations.  The  Constitution  of  1889  does  not  provide  spe- 
cifically for  the  taxation  of  mines,  but  requires  that  taxes  shall 
be  uniform  upon  the  same  class  of  subjects.47 

In  1903,  the  legislature  enacted  a  law  providing  that  mines 
should  be  taxed  upon  the  basis  of  net  profits,  which  are  deter- 
mined from  certified  statements  made  annually  by  the  mining 
companies.  The  net  profits48  are  determined  by  deducting  from 
the  amount  received  for  the  ore  the  actual  expenditures  of 
money  and  labor  in  extracting,  transporting,  reducing,  and 
marketing  the  ore,  and  for  supplies  and  machinery.  Unpatented 
mining  claims  are  not  taxed. 

In  his  messarge  to  the  legislature  in  January,  1913,  the 

Downie,  C.  J.     Historical  review  of  mine  taxation  in  Colorado.     Mining 

Science,  1905,  LXXI,  23. 
Link,  C.  P.     Discussion  of  Report  of  Committee  on  Taxation  of  Mines 

and  Mineral  Lands.    Proc.  Nat.  Tax  Assn.,  1913,  VII,  403. 
Phillips,   J.    B.     Legislative   and   administrative   problems   in    Coloradao. 

Proc.  Nat.  Tax  Assn.,  1914,  VIII,  96. 
Webb,  D.   L.     Taxation  of  mining  property.     Proc.  Amer.  Min.  Cong., 

1913,  XVI,  345- 
Unsigned  articles  and  notes. 

Cripple  Creek  District.  Eng.  and  Min.  Jour.,  LXXXVI,  n/8,  1273; 
XCIL,  1080.  Mining  Science,  LXV.,  34,  254. 

General  notes  on  Colorado.  Eng.  and  Min.  Jour.,  XXXV.,  83,  85; 
XC,  876,  924,  1222;  XCV.,  871,  1021. 

Mining  and  Sci.  Press,  CVII.,  824. 

Mining  Science,  LXVI.,  225. 

Bulletin  American  Mining  Congress,  Nov.  1910,  p.  218;  Dec.  1910, 

p.  233;  March,  1911,  p.  43. 

"Organized  as  a  territory  March  3,  1863  and  admitted  to  the  Union 
July  3,  1890. 

48The  Wood  River  District  became  an  important  producer  of  lead 
in  1881,  and  in  1884  the  first  discoveries  were  made  in  the  Coeur  d'Alene 
District. 

47 Art.  VII,  sec.  5. 

46Revised  Code,  sec.  1864. 


579]  HISTORY  OF   STATE  TAXATION  49 

Governor  suggested  that  the  law  providing  for  the  tax  upon 
net  proceeds  is  probably  unconstitutional.49 

LOUISIANA 

The  only  important  mineral  products  of  Louisiana  are  salt, 
sulphur,  natural  gas  and  petroleum.  The  value  of  the  output 
was  $15,357,841  in  1912,  $21,011,828  in  1913,  and  $21,890,025 
in  1914.50 

Louisiana  has  taxed  mines  under  the  general  property  tax51 
and  has  also  imposed  license  taxes  on  the  business  of  mining. 
An  act  of  1910  created  a  conservation  fund  by  levying  and 
enforcing  the  payment  of  an  annual  license  tax  upon  all  per- 
sons, associations  of  persons,  business  firms  and  corporations  for 
pursuing  the  business  of  severing  timber  and  minerals  from  the 
soil.510  This  law  was  held  to  be  unconstitutional  as  it  was  enacted 
by  the  General  Assembly  before  an  amendment  authorizing 
such  legislation  had  been  voted  upon  by  the  people  of  the 
State.  51b  In  November  1910  the  voters  of  Louisiana  adopted  an 
amendment  to  the  Constitution  (Article  229)  providing  that 
"those  engaged  in  the  business  of  severing  natural  resources, 
as  timber  and  minerals,  from  the  soil  or  water,  whether  they 
hereafter  convert  them  by  manufacture  or  not,  may  be  rendered 
liable  to  a  license  tax ;  the  amount  to  be  collected  may  either  be 
graduated  or  fixed. ' '  In  1912  an  amendment  to  the  Constitution 
was  proposed,  including  a  provision  as  follows:  "Unless  other- 
wise provided  by  the  General  Assembly  by  a  vote  of  two-thirds 
of  the  members  elected  to  each  house,  all  operating  mines  of 
sulphur,  salt  or  other  minerals,  all  oil  or  gas  wells,  all  stone 
quarries,  sand,  gravel  and  shell  pits  shall  be  taxed  upon  a 
percentage  of  the  gross  value  of  the  product  at  the  mouth  of  the 
mine,  well,  quarry,  or  pit.  This  percentage  shall  not  exceed  five 
percent  for  sulphur;  three  percent  for  salt;  two  and  one-half 
percent  for  oil  and  gas,  and  two  percent  for  rock  and  other 
minerals,  inclusive  of  gravel,  sand  and  shells.  All  real  and 
personal  property  of  the  owners  of  such  mines,  wells,  quarries 
and  pits  except  machinery,  tools  and  implements  absolutely 
essential  to  the  operation  of  any  mine,  oil,  or  gas  well,  stone 
quarry,  sand,  gravel  or  shell  pit,  and  except  the  products  them- 

49Mcssage  of  Governor,  January  1913,  p.  32. 

^Mineral  Resource*  of  the  United  States,  1914,  p.  32.  * 

61Laws  of  Louisiana,  1898,  Act  170. 

Kl*Acts  of  General  Assembly,  1910,  Act  196. 

5l6Etchison  Drilling  Co.  v.  Flournoy,  59  Southern  867,  (1910). 


50  MINE  TAXATION  IN  TELE  UNITED  STATES  [580 

selves  within  the  hands  of  the  producer,  shall  be  locally  assessed 
and  taxed."  This  proposed  amendment  was  not  adopted.510 

The  Legislature  of  1912  enacted  a  law  providing  for  an 
annual  license  tax  upon  each  person,  or  association  of  persons, 
firms,  or  corporations  pursuing  the  business  of  severing  natural 
products,  including  all  forms  of  timber,  turpentine,  and  minerals, 
including  oil,  gas,  sulphur  and  salt  from  the  soil.  The  license 
tax  imposed  was  one-half  of  one  percent  of  the  gross  value  of  the 
total  production,  less  the  royalty  interest  accruing  to  the  owner, 
the  license  on  which  was  to  be  paid  by  the  land  or  royalty  owner. 
The  value  of  all  products  was  computed  at  the  place  where  they 
were  taken  from  the  soil.52 

The  Supreme  Court  of  Louisiana  in  interpreting  the  law 
of  1912  which  imposed  a  license  tax  on  the  business  of  severing 
minerals  from  the  soil  and  which  directed  that,  in  computing  the 
gross  value  of  the  product,  the  royalty  should  be  deducted  and 
that  the  license  tax  on  the  royalty  interest  should  be  paid  by 
the  owner  of  the  land  or  royalty  interest,  held  that  the  consti- 
tution authorized  a  license  tax  on  those  engaged  in  the  mining 
business.  "If  the  Legislature  had  undertaken  to  impose  this 
license  tax  upon  the  land  or  royalty  owner,  not  engaged  in  the 
business  of  severing  natural  products  from  the  soil,  it  would 
have  been  without  constitutional  authority."  The  land  owner 
or  owner  of  the  royalty  interest  was  therefore  released  from  pay- 
ing a  license  tax  when  not  actually  engaged  in  the  mining 
business.53 

In  the  Constitution  of  1913  there  is  a  provision  for  a  license 
tax  upon  the  business  of  mining,  the  amount  collected  being 
either  graduated  or  fixed  according  to  the  quantity  or  value  of 
the  product  at  the  place  where  it  is  severed.5* 

In  1914  a  law  was  enacted  authorizing  the  Police  Juries 
of  the  several  parishes  of  the  State  of  Louisiana  to  levy  an 
annual  license  tax  upon  each  person,  or  association  of  persons, 
firms  or  corporations,  pursuing  the  business  of  severing  natural 
products,  viz.,  minerals,  including  oil,  gas,  sulphur  and  salt 
from  the  soil;  provided  the  amount  of  the  license  tax  shall  not 
exceed  the  amount  which  is,  or  may  be,  similarly  levied  by  the 
State  of  Louisiana.54* 

By  an  amendment  adopted  November,   1902,  the  capital, 

BlcHart,  W.   O.  in  Proceedings  of  National  Tax  Association,  1912, 
VI,  77. 

"Acts  of  Louisiana,  1912,  Act  209,  sec.  i  and  2. 


581]  HISTORY  OP   STATE   TAXATION  51 

machinery,  and  other  property  employed  in  mining  operation 
was  exempted  from  parochial  and  municipal  taxation  for  ten 
years  from  January  1,  1900." 

MICHIGAN 

The  state  of  Michigan  has  important  mineral  resources, 
notably  iron,  copper,  coal,  gypsum,  salt,  and  building-stone.  The 
value  of  the  output  in  1912  was  $80,062,486.56  Michigan  was 
admitted  to  the  Union  January  26,  1837,  before  the  mineral 
resources  were  developed  to  an  important  degree  and  in  fact 
before  many  of  the  most  valuable  deposits  were  known  to  exist. 
The  presence  of  copper  in  the  Upper  Peninsula  had  been  noted 
by  explorers  but  the  real  discoveries  began  with  the  work  of  the 
Michigan  Geological  Survey  which  was  created  by  an  act  of  the 
legislature  approved  February  23,  1837. 

Coal  mining  did  not  begin  until  1835.  Copper  mining  was 
begun  on  Keewenaw  Point  in  1842.  A  party  of  United  States 
surveyors  discovered  iron  ore  near  Teal  Lake  in  1844.  Thus  it 
was  that  shortly  after  Michigan  became  a  state  the  problem  of 
the  taxation  of  the  new  mines  and  mineral  resources  required 
attention. 

The  first  legislation  providing  for  the  taxation  of  mines 
was  the  Act  of  April  25,  1846.  This  prescribed  a  specific  tax 
of  four  percent  in  lieu  of  all  other  state  taxes  to  be  levied  upon 
all  ores  and  the  product  of  all  mines,  which  tax  was  to  be  assessed 

"State  v.  Stiles,  68  Southern  947,  (1915). 

"Constitution  of  1913,  Art.  229. 

54aActs  of  Louisiana,  1914,  Act  296,  sec.  i. 

55The  Louisiana  Supreme  Court  in  the  case  of  J.  M.  Guffey  &  Co., 
of  Pittsburg,  v.  J.  L.  Murrell,  tax  collector,  of  Crowley,  La.,  decided  that 
oil  companies  are  not  exempt  from  taxation  under  the  act  exempting 
capital,  machinery  and  other  property  employed  in  mining  operations 
for  a  period  of  ten  years.  The  court  declared :  "Mining  operations  have 
to  do  with  workings  of  a  mine  and  neither  in  the  ordinary  nor  in  the 
scientific  acceptance  of  the  term  'mine'  is  the  term  'oil  well'  included. 
Laws  granting  exemption  from  taxation  must  be  strictly  construed  and 
so  the  operation  of  an  oil  well  can  not  be  held  to  be  within  the  exemption 
granted  to  those  engaged  in  mining  operations."  The  decision  was  a 
heavy  blow  to  oil  interests  in  Louisiana  as  they  had  hoped  to  get 
exemption  from  taxation.  Engineering  and  Mining  Journal,  1910,  XC, 
1091. 

6tMineral  Resources  of  the  United  States,  1912,  p.  57.  The  value  of 
the  output  was  less  in  1913  owing  to  the  strike  and  also  in  1914  due  to  the 
European  war. 


52  MINE  TAXATION  IN  THE  UNITED  STATES  [582 

upon  the  average  yield  of  the  ores  after  being  smelted,  if  smelted 
in  the  state ;  but  if  the  ores  were  to  be  shipped  out  of  the  state 
before  being  smelted,  the  taxes  were  to  be  paid  before  the  ores 
were  removed  from  the  premises  where  they  were  mined.  This 
act  also  provided  further  that  the  tax  on  the  product  of  the 
iron  mines  should  not  exceed  two  percent.  8T 

By  an  act  approved  April  8,  1851,  an  annual  tax  of  one  per- 
cent was  levied  on  the  whole  amount  of  paid-in  capital.  Compa- 
nies paying  this  tax  were  relieved  of  all  state  taxes  on  real  and 
personal  property.88 

The  first  tonnage  tax  law  was  enacted  February  5,  1853. 
It  provided  that  the  following  taxes  be  collected:  one  dollar 
for  each  ton  of  copper  or  mineral  obtained,  ten  cents  for  each 
ton  of  iron  ore,  one-half  cent  for  each  ton  of  coal.  These  taxes 
were  to  be  the  only  state  taxes  on  these  objects.69 

In  1855,  the  legislature  definitely  relieved  domestic  mining 
companies  of  the  payment  of  taxes  on  capital  stock  provided 
they  paid  the  tonnage  taxes  as  prescribed  by  the  law  of  1853.60 
Township  supervisors  were  instructed  by  an  act  in  1861  to  assess 
the  real  and  personal  property  of  all  mining  companies  not 
actually  operating.  This  act  provided  also  that  all  mining 
companies  should  be  taxed  on  all  land  owned  in  excess  of  six 
hundred  forty  acres.61 

The  rates  of  the  tonnage  tax  were  changed  by  the  legisla- 
ture in  1865,82  in  1867,  in  1871,  and  in  1872.  By  this  last 
revision  the  rates  became  seventy-five  cents  a  ton  on  copper 
smelted  in  the  state  and  one  dollar  if  smelted  outside,  one  cent 
on  iron  ore,  and  one-half  cent  a  ton  on  coal.63 

In  1873  the  mining  companies  were  required  to  furnish 
the  assessor  with  a  statement  of  the  weight  of  copper  produced 
and  all  copper  was  assessed  at  its  cash  value,  as  other  personal 
property,  for  county  and  township  purposes.64 

In  1875  the  Michigan  Supreme  Court  declared  unconstitu- 
tional the  law  imposing  a  specific  tax  discriminating  between 

67Laws  of  Michigan,  1846,  Art.  148,  sec.  14. 

™Ibid.,  1851,  Act  144. 

sglbid.,  1853,  Act  41,  sec.  20. 

«°Ibid.,  1855,  Act.  159- 

61/Wrf.,  1861,  Act  200. 

**Ibid.,  1865,  Act  136. 

**Ibid.,  1872,  Act  of  March  29. 

*4Ibid.,  1873,  Act  approved  April  10. 


583]  HISTORY   OF   STATE   TAXATION  53 

ore  smelted  in  the  state  and  that  shipped  outside  to  be  smelted, 
as  being  in  restraint  of  interstate  commerce.'5 

The  State  Legislature  in  1885  suspended  for  five  years  the 
specific  tax  so  far  as  the  same  applied  to  "gold,  silver,  and 
lead  and  the  ores  of  said  minerals."66  The  tonnage  tax  was 
repealed  in  1891  and  thereafter  all  the  property  used  in  the 
business  of  mining,  smelting,  or  refining  was  taxed  for  state  and 
other  purposes  under  the  general  provisions  of  the  law  relating 
to  the  assessment  and  taxation  of  property.67 

The  legislature  of  1911  provided  specifically  for  the  assess- 
ing and  taxing  of  mineral  rights  severed  from  the  ownership 
of  the  surface.  Such  mineral  rights  under  this  law  were  taxable 
as  an  interest  in  real  property  at  the  same  rate  and  subject  to 
all  provisions  of  the  law  relating  to  the  assessment  and  taxa- 
tion of  real  property.08  This  law  was  repealed  in  1915  and 
taxes  under  the  law  were  discharged.69 

The  legislature  on  April  25,  1911,  directed  the  Board  of 
State  Tax  Commissioners  "to  investigate,  examine  into,  invent- 
ory and  appraise  all  mining  property  in  the  State  of  Michigan 
and  all  mineral  rights ' '  and  to  report  the  result  of  the  appraisal 
to  the  State  Board  of  Equalization  on  or  before  the  third  Monday 
of  August,  1911.  An  appropriation  of  thirty  thousand  dollars 
was  made  to  cover  the  expense  of  this  appraisal.70 

J.  R.  Finlay,  an  eminent  mining  engineer,  was  selected  May 
24,  1911,  to  appraise  the  mines  of  the  state  and  on  August  18  he 
filed  his  report.  This  was  the  first  attempted  appraisal  for  tax- 
ation of  all  the  mines  of  a  state  by  a  staff  of  engineers  not  iden- 
tified with  an  institution  of  the  state.  The  appraisers  could 
not  undertake  a  detailed  examination  of  all  the  mines,  but  the 
work  done  was  remarkable  in  its  extent  considering  the  length 
of  time  alloted  to  the  appraisal.  The  report  filed  covers  the 
copper,  iron,  and  coal  mines  but  the  appraisers  decided  that 
the  Michigan  salt,  gypsum,  cement,  brick-clay,  marl,  and  lime- 
stone operations  should  not  be  classed  as  mines.  They  also  did 
not  attempt  to  place  a  value  upon  undeveloped  mineral  lands. 

The  Board  of  Tax  Commissioners  in  its  report  of  December 
14,  1912,  suggested  to  the  Governor  that  the  State  Geological 

6532  Michigan  488. 

"Public  Acts,  1885,  Act.  131. 

"Act  of  June  16,  1891. 

^Michigan  Public  Acts,  1911,  No.  51. 

6BIbid.,  1915,  No.  119. 

70Ibid.,  1911,  No.  114. 


54  MINE  TAXATION  IN  THE  UNITED  STATES  [584 

Survey  cooperate  and  furnish  data  on  the  value  of  the  mineral 
lands  of  the  state.  There  is  now  cooperation  between  the  Geolo- 
gical Survey  and  the  Tax  Commission,  the  State  Geologist  acting 
in  the  capacity  of  appraiser  of  mines.71  Trained  assistants  have 
been  employed  for  this  work,  the  necessary  funds  to  carry  on 
the  work  having  been  provided  by  an  act  of  the  legislature.  The 
copper  mines  however  have  not  been  appraised  by  the  State 
Geologist. 

MINNESOTA 

Shortly  after  Minnesota  was  organized  as  a  territory  in 
1849,  iron  ore  was  reported  near  Gunflint  Lake.72  When  the 
state  was  admitted  to  the  Union  in  1858  none  of  the  important 
ranges  had  been  discovered.  Iron  ore  was  discovered  on  the 
Vermilion  Range  in  1865,73  but  the  first  shipments  were  not  made 
until  1884.  Mesabi  Range  shipments  were  made  in  1892,  two 
years  after  the  boom  on  that  range  began. 

In  1881  the  legislature  enacted  a  law74  providing  that 
mining  companies  might  pay  annually  in  lieu  of  all  other 
taxes,  "on  each  ton  of  copper  fifty  cents,  on  each  ton  of  iron 
ore  mined  and  shipped  or  disposed  of  one  cent  for  each  ton, 
one-half  of  such  payments  to  be  credited  to  the  General  Fund 
of  the  state  and  the  other  half  credited  to  the  county  or  counties 
in  which  such  mines"  were  located.  This  law  was  in  effect  until 
March  9,  1897,  when  it  was  repealed  by  the  legislature.  On  May 
19,  1896,  the  tonnage  law  was  declared  unconstitutional.  A 
constitutional  amendment  was  adopted  permitting  the  taxation 
of  mines  on  quantity  of  production  or  in  such  other  manner  as 
the  legislature  might  determine.  During  the  year  following 
the  repeal  of  the  tonnage  tax,  mines  were  taxed  as  other  property. 

In  1902,  the  Minnesota  Tax  Commission  advised75  that  the 
unanimous  opinion  of  the  Commission  was  that  a  "tonnage  tax 
is  the  only  appropriate  means  for  the  taxation  of  the  output  of 
mines."  The  tonnage  tax  recommended  by  this  commission  was 
to  be  graduated  with  regard  to  the  value  and  the  grade  of  ores. 

The  assessors  working  under  the  general  property  tax  were 
unable  to  value  the  mines  and  secure  justice  among  the  various 

"Allen,   R.   C.     Methods   of   appraisal    for    taxation.      Mining    ana 
Engineering  World,  1914,  XLVI,  463. 

72van  Barneveld,  C.  E.    Iron  Mining  in  Minnesota,  p.  9. 
™Ibid.,  p.  9. 

74General  Laws,  Extra  Session,  1881,  chap.  54,  sec.  I. 
7SReport  of  Minnesota  Tax  Commission,  1902,  p.  43. 


585]  HISTORY   OP    STATE   TAXATION  55 

mines,  and  between  mines  and  other  property.  Great  dissatis- 
faction resulted  until  1907,  when  the  Tax  Commission  was 
created  and  the  problem  of  valuing  the  iron-mines  was  referred 
to  the  commission.  The  commission  made  as  careful  a  study  as 
was  possible  in  the  time  available  and  adopted  a  basis  for  valua- 
ton  which  has  been  used  in  later  appraisals.76 

No  important  changes  in  the  law  have  been  made  as  it 
affects  mines  since  the  Tax  Commission  was  created  by  the 
law  of  1913,  which  specifies  that  mines  shall  be  assessed  at  fifty 
cents  on  the  dollar.77 

In  1906  the  state  received  in  taxes  from  the  iron  mines 
$179,272;  in  1914,  the  state  taxes  paid  by  the  iron  mines 
amounted  to  $1,314,538.  At  a  4-mill  state  tax  rate  and  on  a 
conservative  ore  exhaustion  period  there  would  be  approximately 
a  total  of  future  tax  revenue  of  $28,000,000.  It  is  evident  that 
the  Tax  Commission  has  been  instrumental  in  discovering  a 
source  of  state  revenues  and  in  levying  increased  taxes  upon 
the  iron  mines. 

MONTANA 

The  mineral  resources  of  Montana  are  of  great  importance 
and  the  revenue  which  the  state  derives  from  the  mines  in  the 
form  of  taxes  has  proven  of  great  assistance  in  conducting  the 
affairs  of  the  state. 

As  early  as  1804,  the  Lewis  and  Clarke  expedition  noted 
coal  along  the  Missouri  River,  but  the  first  mining  was  for  gold 
at  Bannack  in  1862.  Placer  gold  mining  was  at  its  height  in 
1867,  three  years  after  the  territory  was  organized.  Silver 
mining  followed  the  discovery  of  lodes  in  1864,  was  at  its  height 
in  1887,  and  continued  until  1892.  Copper  mining  became  of 
importance  after  the  discovery  of  copper  ore  in  the  Anaconda 
shaft  in  1882. 

Taxation  of  mines  received  attention  .at  an  early  date.  By 
the  law  of  1872  both  the  proceeds  and  the  capital  stock  of 
companies  were  subject  to  taxation.78 

The  present  practice  of  taxing  the  net  proceeds  of  mines 
was  practically  started  in  1879.79  Deductions  from  the  gross 

76Hurd,  R.  Iron  Ore  Manual,  p.  20.  McVey,  F.  L.  Taxation  of 
mineral  properties,  Proc.  Nat.  Tax  Assn.,  1908,  II,  411.  Minnesota  Tax 
Commission  Reports.  Infra  chap.  VII,  p. 

''''Laws  of  Minnesota,  1913,  chap.  483. 

""^Statutes  of  Montana,  1872.  Hope  Mining  Co.  v.  Kennon,  3  Mont 
35,  (1877). 

^Revised  Statutes,  1879,  chap.  LIII,  Art  II,  sec.  1047-1051. 


56  MINE  TAXATION  IN  THE  UNITED  STATES  [586 

receipts  may  be  made  for  the  cost  of  extracting  the  ore  from 
the  mine,  reducing  it,  and  converting  it  into  bullion.  The  Consti- 
tution provides  that  all  mining  claims  assessed80  at  the  price  paid 
the  United  States  for  the  land,  all  machinery  and  improvements 
having  a  value  separate  from  the  mines  or  mining  claim,  and 
the  net  proceeds  of  all  mines  and  mining  claims  shall  be  taxed 
as  provided  by  law.  The  statutes  provide  that  mines  shall  pay 
a  tax  on  net  proceeds  and  on  improvements.81  This  law  has 
been  interpreted  by  the  courts  as  applicable  to  coal  mines.82 
The  right  to  minerals  has  been  held88  to  be  taxable  both 
when  the  claims  are  not  patented  and  when  the  right  to  the 
minerals  is  severed  from  the  surface  and  reserved  upon  the  sale 
of  the  surface.84 

NEVADA 

In  1849  gold  was  discovered  in  Gold  Canon  and  in  1859  the 
Comstock  lode  was  opened.  On  March  2,  1861,  the  territory 
of  Nevada  was  organized.  The  taxation  of  mines  at  once  received 
attention  and  in  1861  a  law  was  enacted85  which  exempted  mining 
claims,  except  machinery  and  improvements.  In  1862  the  pro- 
ceeds of  mines  were  taxed.86  At  the  first  constitutional  conven- 
tion, held  in  1863,  it  was  proposed  that  all  property,  including 
mines  and  mining  claims,  should  be  taxed  uniformly  but  the 
constitution  framed  by  the  convention  was  not  adopted  by  the 
voters  of  the  state.  The  second  constitutional  convention  met 
in  1864  and  proposed  a  constitution  containing  an  article  which 
provided  that  the  legislature  should  enact  laws  for  the  taxation 
of  mines  upon  net  proceeds  alone.  This  constitution  was  accepted 
by  the  voters.86*  At  the  first87  session  of  the  legislature  a  tax  of 
100  cents  on  the  $100  valuation  was  levied  upon  the  net  pro- 
ceeds of  mines.88  All  of  the  ores  were  assessed  as  follows :  From 
the  gross  return  per  ton  of  ore  was  deducted  twenty  dollars  per 

^Constitution,  Art.  XII,  sec.  3. 

^Revised  Statutes,  sec.  2563-2571. 

"Montana  Coal  and  Coke  Co.  v.  Livingston,  52  Mont.  780,    (1898). 

"Northern  Pacific  v.  Mjelde,  137  Pac.  386,  (1913). 

"Miscellaneous  notes  on  Montana  taxation :  Min.  and  Eng.  IVorld^ 
XXXVIII,  72;  XXXIX,  583.  Eng.  and  Min.  Jour.,  XCVI,  607,  663. 

85Act  of  Nov.  29,  1861. 

MLaws  of  Nevada,  1862,  p.  131. 

86aBoyle,  E.  D.  Mine  taxation.  Proceedings  of  National  Tax  Asso- 
ciation, 1915,  IX,  80. 

"Nevada  was  admitted  to  the  Union  Oct.  31,  1864. 

88 Laws  of  Nevada,  1864-65,  chap.  LXXXV,  sec.  99. 


587]  HISTORY   OF   STATE   TAXATION  57 

ton  and  seventy-five  percent  of  the  remainder  was  taxed.89  If 
the  value  of  the  ores  was  not  established,  they  were  to  be  assessed 
at  five  hundred  dollars  per  ton.  Ores  valued  at  less  than  twenty 
dollars  were  not  assessed.  In  1867  the  law  was  amended90  in 
order  to  make  allowance  for  the  refractoriness  of  ores.  A  deduc- 
tion of  eighteen  dollars  per  ton  was  to  be  allowed  for  the  treat- 
ment of  ordinary  ores  but  when  the  ore  was  worked  by  the 
Freiberg  or  roasting  process  or  by  any  smelting  process  a  deduc- 
tion of  forty  dollars  per  ton  was  permitted.  The  tax  rate  was 
$1.25  per  $100  valuation. 

Additional  changes  were  made  by  the  legislature  in  1871. 9' 
The  net  proceeds  were  determined  by  deducting  from  the  gross 
the  actual  cost  of  mining,  melting,  transporting,  and  smelting. 
When  the  value  of  the  ore  was  less  than  $12,  the  deduction  was 
not  to  exceed  90  percent  of  the  gross  value  of  the  ore ;  not  over 
80  percent  deduction  was  permitted  on  ore  valued  at  $12  to 
$30 ;  not  over  60  percent  on  ore  valued  at  $30  to  $100 ;  not  over 
50  percent  on  ore  valued  at  more  than  $100.  An  additional 
deduction  of  $15  was  permitted  for  ores  treated  by  the  Frei- 
berg process. 

By  the  law  of  189192  the  net  proceeds  were  assessed  and 
taxed  at  the  same  rate  ad  valorem  as  other  property  is  taxed. 
The  county  assessors  were  authorized  by  the  legislature  of 
1901,93  to  meet  annually  in  order  to  value  uniformly  the  prop- 
erty of  the  state.  The  assessors  thus  practically  formed  a  state 
board  of  appraisers. 

The  office  of  State  License  and  Bullion  Tax  Agent  was 
created  in  1905,  and  the  duty  of  enforcing  the  law  providing 
for  the  taxation  of  the  net  proceeds  of  mines  was  placed  upon 
him.94  The  Constitution  as  amended  in  1906  provides  that 
patented  claims  shall  be  assessed  at  not  less  than  five  hundred 
dollars,  except  when  one  hundred  dollars  in  labor  has  been 
actually  performed  on  such  patented  mine  during  the  year, 
in  addition  to  the  tax  upon  the  net  proceeds.95 

89In  State  v.  Estabrook  (3  Nevada  173)  it  was  held  that  the  part  of 
the  law  which  directed  that  the  tax  be  levied  on  three-fourths  of  the  value 
instead  of  the  full  value  was  unconstitutional. 

°°Statutes  of  Nevada,  1867,  Special  Session,  chap.  Ill,  sec.  3. 

^Ibid.,  1871,  chap.  XXXV. 

»2Ibid.,  1891,  p.  162. 

93 Ibid.,  1901,  p.  61. 

°*Ibid.,  1905,  p.  226. 

"Constitution,  Art.  X,  sec.  I. 


58  MINE  TAXATION  IN  THE  UNITED  STATES  [588 

It  was  the  general  opinion  that  the  mining  companies  were 
evading  the  law.  The  Bullion  Tax  Agent  pointed  out96  various 
defects  in  the  law,  notably  the  irregularities  which  resulted 
from  permitting  the  mining  companies  to  make  deductions  for 
the  cost  of  milling.  Separate  milling  companies  had  been 
organized  and  the  profit  was  made  through  the  milling  company 
which  was  taxed  upon  plant  and  not  upon  proceeds.  Recom- 
mendation was  made  by  the  Bullion  Tax  Agent  that  the  admin- 
istration of  the  tax  upon  net  proceeds  be  placed  under  a  state 
tax  commission.  In  1912,  a  committee  of  citizens  was  appointed 
to  investigate  taxation  in  Nevada  and  to  make  recommendations. 
The  report  of  this  committee  included  several  recommendations,97 
notably,  that  a  permanent  tax  commission  be  created  and  that 
the  constitution  be  amended  to  permit  a  graduated  tax  upon 
the  gross  output  of  mines  instead  of  the  tax  on  the  net  proceeds 
now  in  force. 

As  a  result  of  the  work  of  this  committee  the  Nevada  Tax 
Commission  was  created98  and  the  office  of  Bullion  Tax  Agent 
abolished.  This  Commission  is  charged  with  the  duty  of  deter- 
mining the  net  proceeds  of  mines  and  is  given  the  power  to  decide 
what  charges  are  "just,  proper  and  reasonable,  and  not  intro- 
duced to  deprive  or  defraud  the  State."99  The  Commission 
found  that  most  of  the  mining  companies  were  maintaining  sec- 
ondary milling  and  transportation  companies  which  were  defeat- 
ing the  bullion  tax.  The  Nevada  Mine  Operators'  Association 
suggested  a  conference  between  its  executive  committee  and  the 
Tax  Commission100  and  at  this  conference  an  effort  was  made 
to  suggest  means  of  correcting  abuses  and  of  providing  for  the 
equalization  of  the  tax  burden.  "It  was  proposed  by  the  mine 
operators  that  for  1913  the  mines  would  abolish  their  milling 
and  transportation  subdivisions,  and  report  the  actual  'net 
proceeds'  from  all  their  operations,  but  that  a  flat  charge  of  $3 
per  ton  should  be  allowed  in  addition  to  the  legal  deduction 
from  the  value  of  the  gross  yields  in  figuring  the  net,  this  flat 
charge  to  reduce  to  $2  in  1914,  and  to  $1  in  1915  and  thereafter." 

This  proposal  was  rejected  by  the  Tax  Commission  for  the 
reason  that  many  mining  companies  in  Nevadaa  were  not  making 

96Annual  Report  of  State  Bullion  Tax  Agent,  1912,  p.  8. 

91Report  of  the  Nevada  Citizens  Economy  and  Taxation  Committee, 

,  P.  99- 

"Laws  of  Nevada,  1913,  chap.  134;  Ibid.,  1915,  chap.  153: 
"Ibid.,  1913,  chap.  134,  sec.  9;  Ibid.,  1915,  chap.  153,  sec.  13. 
100Report  of  Nevada  Tax  Commission,  1913-1914,  p.  18. 


589]  HISTORY   OP    STATE   TAXATION  59 

$3,  $2,  or  even  $1  per  ton  and  would  by  the  operation  of  any 
flat-rate  exemption  be  relieved  from  the  payment  of  any  taxes 
at  all.  The  operators  also  requested  permission  to  make  a  charge 
for  depreciation  of  their  plants.  The  Tax  Commission  care- 
fully considered  the  entire  matter  and  made  a  definite  proposal 
to  the  operators  at  a  conference  on  September  9,  1913,  which 
proposal  was  formally  accepted  by  the  operators. 

The  proposed  rule101  for  the  assessment  of  mines  in  1913 
follows : 

AGREEMENT 

The  Nevada  Tax  Commission  proposes  the  following  procedure 
for  general  adoption  throughout  the  State,  in  assessing  the  mining 
industry  for  taxation  during  and  covering  the  entire  year  1913 : 

IMPROVEMENTS 

To  be  assessed  as  other  property  is  assessed  in  the  county  in 
which  it  is  situated. 

ASSESSMENT  OF  THE  NET  PROCEEDS  OF  MINES 
The  net  proceeds  of  any  mine  shall  be  determined  as  follows : 
From  the  actual  value  of   the  gross  yield  (in  any  quarter)  shall 
be  deducted  the  sum  of  the  following  items  of  expense: 

(1)  Management 

All  necessary  current  administrative  expenses,  excepting: 

(a)  Federal,  state,  or  county  taxes. 

(b)  Payments  of  interest  on  bonds  or  other  indebtedness. 

(c)  Expenses  of  maintaining  offices  other  than  the  mine  office. 

(2)  Cost  of  Extracting 

(a)  All  necessary  current  mining  expense  (not  including  apportion- 

ment of  general  administrative  expense)  including  expense 
of  contemporaneous  development  and  exploration  of  the 
mine  itself. 

(b)  A   depreciation  charge  which   shall  be  equivalent  to   quarter- 

annual  installment  of  the  amount  calculated  to  be  written  off 
annually  to  redeem  80  percent  of  the  original  and  all  subse- 
quent investments  in  mine  plant  or  improvements  (not  in- 
cluding repair  and  maintenance  charges  against  operation 
account),  within  the  entire  estimated  life  of  the  plant,  in- 
cluding the  time  during  which  it  has  been  used  plus  its 
estimated  residual  life  which  may  equal  but  not  exceed  the 
estimated  life  of  the  mine.  Such  depreciation  or  redemption 
charges  shall  cease  when  80  percent  of  any  investment  in 
improvements  shall  have  been  charged  off  in  the  manner 
provided  in  the  foregoing. 

lolReport  of  Nevada  Tax  Commission,  1913-1914,  p.  18. 


60  MINE  TAXATION  IN  THE  UNITED  STATES  [590 

(3)  Cost  of  Transportation 

Where  the  transportation  facilities  used  in  conveying  the  mine 
products  from  the  mine  to  the  place  of  reduction  or  sale  are  owned 
directly  or  indirectly  by  the  company: 

(a)  The  actual  expense  of  operating  such  plant  facilities,  exclusive 

of  general  or  administrative  expense. 

(b)  A  depreciation    charge    calculated  in  each  case  to  redeem    80 

percent  of  the  original  investment  in  transportation  facilities, 
in  the  same  manner  as  mine-plant  depreciation  is  figured. 
Where  the  said  mine  products  are  transported  by  common  carrier 
or  by  facilities  not  owned  by  the  company  and  from  which  it  derives 
no  revenue: 

(a)  The  actual  amount  paid  for  the    carriage    of    the    said    mine 
products  with  no  allowance  for  depreciation. 

(4)  Cost  of  Reduction  or  Sale 

Where  the  reduction  works  in  which  the  mine  products  are 
treated  are  owned  directly  or  indirectly  by  the  company: 

(a)  The    actual    expense    of    reduction    or   treatment   or   sale    of 

product,  exclusive  of  general  or  administrative  expense. 

(b)  A    depreciation    charge    calculated    in    each    case    to    redeem 

80  percent  of  the  investment  in  reduction  works  in  the  same 

manner  as  mine-plant  depreciation  is  figured. 
Where  the  mine  products  are  treated  in  plants  not  owned  by  the 
company  and  from  the  operation  of  which  it  derives  no  revenue : 
(a)  The    actual    amount    paid    for  the  treatment  or  reduction  of 

the  ores,  and  marketing  of  the  product,  with  no  allowance 

for  depreciation. 

The  sums  of  items  (i),  (2),  and  (4)  shall  constitute  the  offset 
deduction  from  the  gross  yield  for  the  determination  of  the  actual 
net  yield,  and  the  remainder  shall  be  the  actual  net  yield  for  the 
purpose  of  taxation.  To  assess  the  mining  industry  on  the  same 
percentage  of  actual  value  as  that  at  which  other  property  is  assessed, 
which  is  determined  for  1913  as  60  percent  of  the  actual  cash  value 
as  an  average  for  the  State,  a  further  deduction  from  the  value  of 
the  gross  yield  equivalent  to  40  percent  of  the  actual  net  yield,  as 
hereinbefore  defined,  shall  be  allowed  and  this  shall  be  charged  to 
management,  extraction,  transportation,  reduction  and  sale,  in  equal 
proportion  to  each  of  the  four  said  items. 

The  acceptance  of  this  proposal  by  the  Nevada  Tax  Commission 
as  its  rule  of  action,  in  fixing  the  assessment  of  the  net  yield  of  all 
mines  of  the  State,  shall  be  absolutely  contingent  on  the  entire  aboli- 
tion of  the  so-called  secondary  milling  and  transportation  companies, 
as  far  as  the  statements  and  accounts  rendered  the  said  Commission 
are  concerned. 

The  actual  earnings  of  Nevada  gold  and  silver  mines  in  1913 
were  much  less  than  in  1912,  but  the  taxes  levied  upon  the  net 


591]  HISTORY  OP   STATE  TAXATION  61 

proceeds  of  mines  amounted  to  $56,574.94  in  1912,  and  to 
$182,076,37  in  1913.  This  increase  was  due  primarily  to  the 
elimination  of  the  subsidiary  milling  and  transportation 
companies. 

In  determining  the  valuation  of  the  net  proceeds  for  1914, 
the  Tax  Commission  made  a  proposal  to  the  mine  operators  that 
they  should  take  their  choice  of  two  alternative  propositions: 
(1)  the  assessment  of  80  percent  of  the  net  proceeds  determined 
as  in  1913,  or  (2)  the  assessment  of  60  percent  of  the  net  without 
depreciation.  As  the  Attorney-General  decided  that  deprecia- 
tion was  not  authorized  by  the  statute,  the  mine  operators 
accepted  the  appraisal  at  60  percent  without  depreciation. 

The  Tax  Commission  adopted  the  following  rule102  for  the 
assessment  of  mines  in  1914 : 

The  net  proceeds  of  any  mine  shall  be  determined  as  follows : 
From  the  actual  value  of  the  gross  yield  in  any  quarter-year 
shall  be  deducted  the   following  items  of   expense   incurred   in   the 
same  quarter : 

(1)  Management 

All  ordinary  and  necessary  administrative  expense,  excepting: 

(a)  Payments    on    principal    or    interest     on     bonds     or     other 

indebtedness. 

(b)  The   expense   of  maintaining  offices   outside   of  the   State  of 

Nevada. 

(2)  Mining 

All  ordinary  and  necessary  expenditures  actually  made  for 
mining  (exclusive  of  general  or  administrative  expenses)  including 
the  cost  of  contemporaneous  development  and  exploration  of  the 
mine  itself. 

(3)  Transportation 

(a)  Where  the  transportation  facilities  used  in  conveying  the 
mine  products  from  the  mine  to  the  place  of  reduction  or 
sale  are  owned  or  controlled  directly  or  indirectly  by  the 
mining  company :  The  actual  expense  of  reduction  or 
treatment  or  sale  of  the  said  products. 

The  actual  necessary  expenditures  for  the  maintenance  and 
repair  of  mine,  transportation  and  milling  or  reduction  plants  may 
be  included  in  the  foregoing  deductions,  but  no  charge  whatever 
for  depreciation  or  the  redemption  of  any  investment  in  mine 
ground,  development  done  prior  to  the  quarter  for  which  the  report 
is  made,  or  plant  construction  shall  be  allowed. 

The  sums  of  items  (i),  (2),  (3),  and  (4)  shall  constitute  the 
offset  deductions  against  the  value  of  the  gross  yield,  and  the 

102/&«f.,  p.  21. 


62  MINE  TAXATION  IN  THE  UNITED  STATES  [592 

difference  in  each  case  between  the  said  gross  yield  and  the  said  sum 
shall  be  deemed  the  net  proceeds  for  the  purpose  of  taxation. 

To  equalize  the  mine  assessment  with  that  of  other  property, 
60  percent  of  the  net  proceeds  determined  as  provided  in  the  fore- 
going shall  be  assessed — this  rule  applying  to  all  mines  from  which 
the  ore  is  extracted  directly  by  the  owners.  In  the  case  of  producing 
"leases"  the  lessee  shall  be  entitled  to  deduct,  in  addition  to  the  items 
enumerated,  the  royalties  actually  paid  to  the  lessor,  but  royalties 
received  by  any  lessor  shall  be  reported  separate  from  other  receipts 
and  60  percent  thereof  shall  be  assessed  with  no  deduction  whatever. 

NEW  MEXICO 

While  New  Mexico  has  never  ranked  as  one  of  the  leading 
mining  states,  the  mineral  wealth  of  the  state  is  relatively  of 
great  importance  when  compared  with  the  other  resources.  As 
early  as  1770  Santa  Eita  was  a  flourishing  gold  district.103 

The  Territory  of  New  Mexico  was  organized  December  13, 
1850,  and  on  January  18,  1865,  the  Territory  enacted  laws 
regulating  the  location  of  mining  claims.  During  the  succeed- 
ing years  mining  continued  to  attract  attention  although  few 
important  mines  or  districts  were  developed.  In  later  years  the 
coal  and  low-grade  copper  deposits  have  received  much  attention. 
The  value  of  the  mineral  output  was  $14,391,355  in  1912, 
$17,862,369  in  1913,  and  $18,072,919  in  1914.10* 

Under  the  Territorial  Government  all  property  was  taxed 
upon  an  ad  valorem  basis  until  1891  when  a  law  was  enacted 
authorizing  a  tax  upon  the  net  product  of  mines.  The  Consti- 
tution, adopted  and  ratified  January  21,  1911,  specifies105  that 
the  legislature  shall  have  power  to  provide  for  the  levy  of 
specific  taxes,  including  "taxes  upon  the  production  and  output 
of  mines,  oil  lands  and  forests;  but  no  double  taxation  shall 
be  permitted." 

In  1891  the  legislature  had  provided  for  the  taxation  of 
mines  and  mining  claims  upon  "the  net  product  and  upon 
surface  improvements  only."106  The  same  legislature  provided 
for  the  exemption  of  mining  claims,  but  not  the  net  product  and 
surface  improvements  thereof,  for  a  period  of  ten  years  after 
location.107 

™3Bulletin  285,  United  States  Geological  Survey. 
104Mineral  Resources  of  the  United  States,  United  States  Geological 
Survey,  1914,  p.  32.* 
105Art.  VIII,  sec.  2. 

109Laws  of  New  Mexico,  1891,  chap.  77. 
107Ibid.,  1913,  chap.  84,  sec.  2. 


593]  HISTORY   OP   STATE   TAXATION  63 

In  1913  the  legislature  specified  that  property  should  be 
listed  for  taxation  at  one-third  of  its  cost  value.  The  second 
state  legislature  enacted  a  law  providing  that  mines,  mining 
claims,  or  mineral  lands  be  divided  into  two  classes,  (1)  pro- 
ductive and  (2)  non-productive.  Productive  mines  and  mineral 
lands  are  those  mined  in  good  faith  for  the  mineral  values  with 
a  fair  degree  of  continuity  throughout  the  year.  Productive 
mines  are  taxed  upon  the  net  value  of  the  mineral  extracted  at 
the  same  rate  as  other  properties  are  taxed  in  the  county  or 
other  subdivision  in  which  such  mine  is  situated.  All  non-pro- 
ductive patented  mining  claims  and  other  non-productive 
mineral  lands  are  assessed  and  taxed  upon  a  reasaonable  valua- 
tion for  the  minerals  in  addition  to  the  surface  value  for  other 
than  mining  purposes.108 

OHIO 

The  value  of  the  mineral  output  of  Ohio  increased  from 
$111,229,656  in  1912  to  $121,690,661  in  1913,  but  decreased  to 
$101,661,384  in  1914.109  The  most  important  minerals  pro- 
duced are  coal,  natural  gas,  and  petroleum. 

The  property  tax  has  been  used  in  Ohio  since  1825110  and 
the  tax  law  essentially  in  its  present  form  was  enacted  in  1846. 
Property  is  assessed  locally  and  taxed  for  state  and  local  pur- 
poses. In  assessing  property  its  value  for  mining  purposes  is 
considered.  As  minerals  are  mined  proper  deductions  from  the 
assessed  value  are  made.  Mineral  rights  are  assessed  separately 
when  they  are  owned  separately.111 

The  assessment  of  real  property  is  made  quadrennially112 
and  of  personal  property  annually.  The  assessor  when  apprais- 
ing personal  property  makes  a  list  of  all  new  mines,  wells,  etc., 

™6Ibid.,  1915,  chap.  55. 

™9Mineral  Resources  of  the  United  States,  1914,  P-  32.* 

110Bogart,  E.  L.  Financial  history  of  Ohio.  University  of  Illinois 
Studies  in  Social  Sciences,  1912,  I,  181. 

"Apparently  this  section  of  the  law  was  ignored  by  the  assessors 
in  1901  as  the  assessed  value  of  coal  and  oil  lands  in  three  counties 
totalled  $298,794.  The  value  of  the  separately  owned  mineral  rights  as 
determined  by  the  Commission  in  1911  was  $17,925,993-  (Second  Annual 
Report,  Ohio  Tax  Commission,  1911). 

112Prior  to  1911  the  assessing  was  done  by  local  officers  elected 
decennially.  Real  estate  was  valued  in  1826,  1835,  1841,  1847,  1854,  1861, 
1871,  1881,  1891,  1901,  and  1911. 


64  MINE  TAXATION  IN  THE  UNITED  STATES  [594 

begun    or    constructed    since    the    last    preceding    quadrennial 
appraisement.113 

At  an  election  held  September  3,  1912  the  constitution  was 
amended  so  that  "laws  may  be  passed  providing  for  the  impo- 
sition of  taxes  upon  the  production  of  coal,  oil,  gas,  and  other 
minerals."114 

OKLAHOMA 

The  State  of  Oklahoma  is  an  important  producer  of  minerals, 
principally  coal,  petroleum,  natural  gas,  and  zinc.  The  value  of 
the  output  was  $53,614,130  in  1912,  $80,150,820  in  1913,  and 
$78,744,447  in  1914.115 

The  policy  of  Oklahoma  has  been  to  levy  state  taxes  upon 
gross  product  and  also  a  property  tax  for  state,  county,  and 
local  purposes  upon  all  improvements.  The  Constitution  author- 
izes the  legislature  to  levy  gross  revenue,  income,  production, 
or  other  specific  taxes.116  Taxes  upon  gross  production  have  been 
supported  by  the  courts  as  being  taxes  upon  business  and  not 
upon  property.117 

In  valuing  non-producing  mineral  lands  the  assessors  are 
required  to  consider  and  appraise  minerals  and  mineral  rights.118 

The  tax  upon  gross  production  is  a  percentage  of  the  gross 
receipts  after  deductions  are  made  for  royalties.  The  important 
features  of  the  present  law  were  first  enacted  May  26,  1908,119 
and  were  amended  in  1909.120  In  1910  a  new  statute  was  enacted 
and  the  rates  or  percentages  were  changed.121  The  early  laws 
taxing  gross  receipts  specified  coal  as  well  as  other  mineral 
products. 

The  law  was  amended  again  in  1913,122  in  1915,123  and  also 
by  the  legislature  in  1916.124  The  law  of  1915  provided  that 
the  tax  levied  should  be  in  lieu  of  any  other  taxes  that  might 

113Laws  of  Ohio,  1911,  sec.  5562. 
114Constitution,  Art.  XII,  sec.  10. 

*15Mineral  Resources  of  the  United  States,  1914  United  States  Geo- 
logical Survey,  p.  32.* 

116Constitution,  Art.  X,  sec.  12. 

11TiS4  Pacific  362,  (1916). 

ll8Revised  Statutes,  1910,  chap.  72,  sec.  7304. 

*19Laws  of  Oklahoma,  1908,  chap.  71,  pp.  640-645. 

I20lbid.,  1909,  chap.  39,  pp.  624-626. 

121Ibid.,  1910,  chap.  44,  pp.  65-70. 

122Ibid.,  1913,  pp.  640-643. 

123Ibid.,  1915,  pp.  180-183. 

12*Ibid.,  1916,  pp.  102-110. 


595]  HISTORY  OP   STATE   TAXATION  65 

be  levied  and  collected  on  an  ad  valorem  basis  upon  the  equip- 
ment and  machinery  in  and  around  any  well  or  mine  and  used 
in  the  actual  operation  of  such  well  or  mine.  It  has  been  held 
that  the  law  is  not  for  the  purpose  of  exempting  the  equipment 
and  machinery  from  taxation  but  to  permit  the  levying  of  a 
gross  production  tax  in  lieu  of  any  other  tax  that  might  be 
levied  and  collected  on  such  property  upon  an  ad  valorem  basis. 
This  is  not  an  exemption  from  taxation  as  prohibited  by  the 
constitution  of  Oklahoma.125 

The  law  of  1908  provided  for  a  tax  of  2  per  cent  on  the 
gross  proceeds  of  coal  mines,  the  law  of  1909  reduced  the  tax 
to  one-half  of  one  percent,  and  in  the  law  of  1915  coal  mines 
are  not  specified.  The  rate  on  petroleum  and  natural  gas  has 
also  been  changed,  the  rate  in  1909  having  been  one-half  of  one 
per  cent,  in  1913  three-fourths  of  one  per  cent,  and  in  1915  two 
per  cent,  while  in  1916  the  rate  was  increased  to  three  per  cent, 
the  tax  on  metalliferous  mines  has  undergone  practically  no 
change,  the  rate  in  1909  having  been  one-half  of  one  per  cent 
the  same  as  in  1916. 

In  considering  the  power  of  the  legislature  to  distinguish, 
select,  and  classify  objects  of  taxation  the  court  held  that  the 
legislature  has  a  wide  range  of  discretion.  While  the  classifica- 
tion must  be  reasonable  there  is  no  precise  rule  of  reasonableness 
and  there  cannot  be  an  exact  exclusion  or  inclusion  of  persons 
and  things.  The  classification  adopted  must  always  rest  upon 
some  difference  which  bears  a  reasonable  and  just  relation  to 
the  act,  in  respect  to  which  the  classification  is  proposed,  and 
can  never  be  made  arbitrarily  and  without  any  such  basis.  A 
statute  levying  one  rate  of  tax  on  oil  and  gas  and  a  lesser  rate  on 
ores  bearing  lead,  zinc,  jack,  gold,  silver,  copper,  or  asphalt,  and 
which  omits  a  gross  production  tax  on  coal,  is  not  repugnant  to 
the  provision  of  the  constitution  to  the  effect  that  taxes  shall  be 
uniform  upon  the  same  class  of  subjects.  Mining  property  or  the 
business  of  mining  may  be  placed  in  a  class  by  itself  and  taxed 
by  some  method  peculiarly  appropriate  to  that  class,  and  the 
legislature  may  arrange  and  divide  the  various  subjects  of  tax- 
ation into  various  classes,  providing  the  tax  is  uniform  upon  all 
those  belonging  in  the  same  class  and  upon  which  it  operates.126 

125In   re   Gross    Production   Tax   Wolverine    Oil    Co.,     154    Pacific 
362,  (1916). 

126Ibid.,  p.  362. 


66  MINE  TAXATION  IN  THE  UNITED  STATES  [596 

The  taxes  upon  gross  production  are  levied  and  assessed 
by  the  State  Auditor.  According  to  the  law  of  1916  the  royalty 
interest  is  taxed  under  the  gross  production  tax,  the  owner 
of  the  royalty  interest  paying  the  tax.  As  previously  noted 
the  gross  production  tax  is  in  lieu  and  in  full  of  all  taxes  by 
the  state,  counties,  cities,  towns,  townships,  school  districts  and 
other  municipalities  upon  any  property  rights  attached  to  or 
inherent  in  the  right  to  the  minerals  or  the  mining  rights  and 
privileges,  upon  the  machinery,  appliances,  and  equipment  used 
in  and  around  the  property  in  producing  the  mineral,  and  upon 
the  product  during  the  tax  year  in  which  it  is  produced.  Any 
other  rights  in  the  property  and  mineral  in  storage  the  year 
following  its  production  are  assessed  and  taxed  as  other  prop- 
erty in  the  taxing  district.127 

The  graduated  land  tax  has  a  tendency  to  restrict  the 
quantity  of  mineral  land  controlled  by  mining  interests.128 

PENNSYLVANIA 

The  value  of  the  mineral  output  of  Pennsylvania  greatly 
exceeds  that  of  any  other  state,  the  value  having  been 
$445,799,653  in  1912,  $506,466,759  in  1913  and  $452,374,085  in 
1914.129  The  most  important  products  are  coal,  petroleum,  and 
natural  gas. 

In  1844  Pennsylvania  enacted  laws  regulating  assessment 
of  property,  and  these  have  continued  to  be  the  principal 
features  of  the  laws  whch  have  controlled  the  valuation  of  mines 
and  mineral  lands.  In  1857  it  was  held  that  coal  and  land  could 
be  assessed  separately.130 

The  legislature  enacted  a  law  August  25,  1864  levying  a 
tax  upon  railroad  and  navigation  companies  on  the  tonnage 
carried,  the  rate  varying  with  the  character  of  the  commodity. 
The  rate  on  the  product  of  mines,  quarries,  and  clay  beds,  in  the 
condition  in  which  the  product  was  taken  from  the  ground,  was 
two  cents  a  ton.131 

In  1868  transportation  companies  having  the  right  to  mine, 
purchase,  or  sell  anthracite  or  having  the  right  to  lease  from  or 
to  parties  the  lands  or  mines  from  which  anthracite  is  taken 

l27Laws  of  Oklahoma,  1916,  p.  104. 
128/n/ro,  p.  108. 

129Mineral  Resources  of  the  United  States,  1914,  p.  32.* 
130Logan  v.  Washington  Co.,  29  Pa.  373. 

181This  law  was  declared  unconstitutional  in  1872.  See  Reading  R. 
Co.  v.  State  of  Pa.,  15  Wall.  232,  (1872). 


597]  HISTORY  OP   STATE  TAXATION  67 

were  required  to  pay  a  state  tax  of  four  cents  a  ton  upon  all 
coal  mined  or  purchased.  This  tax  was  in  lieu  of  other  state 
taxes  including  the  tax  upon  the  transportation  of  coal.132 

The  courts  held  that  mined  coal  is  personal  property  when 
in  the  mine  as  well  as  when  stored  on  the  surface.183 

It  is  interesting  to  note  that,  in  chartering  the  Miners' 
Hospital  and  Asylum  of  Schuylkill  County  on  April  5,  1870, 
the  Pennsylvania  Legislature  imposed  a  tax  of  one  cent  upon 
each  ton  of  coal  transported  over  the  railroads  in  the  county. 
This  tax  was  to  provide  funds  for  the  erection,  maintenance,  and 
endowment  of  the  hospital  and  the  owners  of  the  coal  were 
authorized  to  charge  one  cent  more  than  the  price  at  whjch  the 
coal  had  been  sold  under  contract.  This  tax  was  to  be  collected 
until,  in  the  opinion  of  the  Board  of  Managers  of  the  Hospital, 
sufficient  had  been  collected  to  purchase  the  necessary  grounds, 
erect  and  furnish  the  buildings,  pay  the  current  expenses  and 
create  a  permanent  fund  the  interest  of  which  would  be  sufficient 
to  provide  for  the  yearly  expenses  of  the  Hospital.  The  Legis- 
lature specified  however  that  the  total  amount  collected  should 
not  exceed  five  hundred  thousand  dollars.13* 

By  the  Act  of  April  24,  1874,  the  legislature  levied  a 
franchise  tax  upon  every  corporation  operating  in  Pennsylvania 
and  possessing  the  corporate  right  or  privilege  to  mine  or  to 
purchase  or  sell  coal.  This  tax  upon  the  corporate  franchise  was 
payable  into  the  treasury  of  the  commonwealth  and  was  at  the 
rate  of  three  cents  upon  each  ton  (2240)  of  coal  so  mined  or 
purchased,  "provided  that  the  amount  of  coal  consumed  in  the 
transaction  of  its  business  by  any  such  company"  should  not 
be  "included  in  its  return  and  provided  that  the  tax  should 
not  be  payable  more  than  once  in  respect  to  the  same  ton  of 
coal."  This  statute  was  supported  by  the  courts  in  several 
decisions.135  However  by  an  Act  of  June  7,  1879,  the  law  was 
amended,  and  the  rate  was  continued  at  three  cents  per  ton 
until  July  1,  1880 ;  thereafter  it  was  one  cent  per  ton  until  July  1, 
1881.  The  tax  was  entirely  discontinued  after  the  latter  date. 

The  mines  of  the  state  are  taxed  locally  upon  real  and 
personal  property.  An  annual  state  tax  is  levied  upon  the 
capital  stock  of  corporations,  and  upon  corporate  loans.  The 

132Laws  of  Pennsylvania,  1868,  pp.  iio-m. 

138Lykens  Valley  Coal  Co.  v.  Dock,  62  Pa.  232  (1869). 

™*Laws  of  Pennsylvania,  1870,  p.  920. 

185Kittaning  Coal  Co.  v.  Commonwealth,  79  Pa.  100,  (1875). 


68  MINE  TAXATION  IN  THE  UNITED  STATES  [598 

principal  problem  in  the  taxation  of  mines  in  Pennsylvania  has 
been  that  of  valuation.186 

In  1909  the  Pennsylvania  legislature  appointed  a  Joint 
Committee  to  make  a  report  upon  taxation  of  mines.  This 
committee  drafted  a  bill  favoring  the  taxing  of  anthracite  at  the 
mine,  but  no  action  was  taken  until  1913  when  an  act  was 
passed  providing  that  anthracite  should  be  taxed  two  and  one- 
half  per  cent  of  the  gross  value  per  ton  at  the  mine  when  ready 
for  market.137  The  mining  companies  questioned  the  constitution- 
ality of  this  act  and  the  court  held  that  the  law  was  in  violation 
of  the  constitutional  provision  directing  that  "all  taxes  shall 
be  uniform  upon  the  same  class  of  subjects  within  the  territorial 
limits  of  the  authority  levying  the  tax"  as  it  makes  an  arbi- 
trary distinction  and  discrimination  between  the  producers  of 
anthracite  and  those  mining  bituminous  coal,  the  latter  not 
being  subjected  to  this  special  tax.  This  was  the  opinion  of  the 
court  given  in  October  1915  on  the  Act  of  1913.138  The  legis- 
lature of  1915  had  revised  the  law  and  the  new  law  had  been 
signed  by  the  Governor  on  June  1,  1915.  Under  the  new  law 
the  tax  rate  is  two  and  one-half  percent  as  before  and  is  levied 
only  on  anthracite,  the  essential  difference  from  the  old  law 
being  in  the  plan  of  collecting  the  tax  and  distributing  the 
proceeds.138* 

SOUTH  CAROLINA 

South  Carolina  has  never  ranked  as  an  important  producer 
of  minerals.  Prior  to  1912,  phosphate  mining  was  relatively  of 
considerable  importance,  but  recently  the  industry  declined.  In 

™«Infra,  chap.  VII. 

131Laws  of  Pennsylvania,  1913,  Act.  374. 

138Commonwealth  v.  Alden  Coal  Co.,  96  Atlantic  246. 

188aThe  correspondent  of  Coal  Age  writes  on  November  25,  1916, 
as  follows :  "So  far  as  action  on  the  part  of  the  state  is  concerned  the 
1915  act  is  as  dead  a  letter  as  the  anthracite  tax  law  of  1913,  which  was 
declared  unconstitutional  by  the  Supreme  Court.  The  1915  anthracite 
tax  law  was  so  framed,  it  was  thought,  that  the  faulty  features  of  the 
prior  law  would  not  invalidate  it  It  provides  the  same  rate  of  tax,  and 
under  its  provisions  the  coal  companies  should  have  started  filing  their 
reports  with  the  auditor  general  with  the  beginning  of  the  present  year. 
Attorney  General  Brown,  however,  when  the  time  for  filing  of  the  reports 
arrived,  notified  the  auditor  general  that  he  would  advise  him  regarding 
the  matter.  This  advice,  it  is  said,  has  not  yet  been  given.  No  reports 
have  been  filed  and  no  attempt  has  been  made  to  collect  any  of  the  tax. 
While  the  state  officials  interested  will  not  say  the  1915  act  is  as  defective 


599]  HISTORY  OP   STATE  TAXATION  69 

1912,  the  value  of  the  total  mineral  product  was  $1,606,989  while 
in  1913  it  was  $1,464,150  and  in  1914,  $1,414,294.139 

The  Constitution  of  1868  provided  for  uniform  taxation 
except  on  mines,  the  proceeds  only  of  which  were  to  be  taxed.140 
The  Constitution  of  1895  made  a  similar  limitation  upon  the 
taxation  of  mines.141 

Personal  property  used  in  connection  with  mines  and  all 
land  not  actually  mined  is  assessed  and  taxed  as  other  personal 
property  and  real  estate.  Land  actually  mined  is  not  taxed 
except  upon  the  gross  proceeds  which  are  determined  by  the 
cash  market  value  of  the  material  mined.142 

UTAH 

The  Mormons  entered  Utah  in  1847,  but  paid  no  attention 
to  mining  in  the  early  days,  although  it  is  claimed  that  they 
soon  realized  the  great  mineral  wealth  of  the  area  surrounding 
the  fertile  valleys  in  which  they  had  located.143 

Utah  was  organized  as  a  territory  December  9,  1850.  The 
«o-called  "Utah  War"  of  1857  brought  into  the  district  a  con- 
siderable number  of  United  States  troops.  Later,  in  1862,  a  de- 
tachment of  California  volunteers  was  located  at  Salt  Lake 
and  these  soldiers,  experienced  in  California  mining,  began 
prospecting  in  the  mountains  near  by.  The  first  mineral  discov- 
ery was  reported  in  Bingham  canyon  in  1863.  Other  discoveries 
soon  followed  and  mining  became  of  great  importance.  In  1872 

constitutionally  as  is  the  act  of  1913,  it  is  generally  believed  by  lawyers 
that  the  newer  act  is  no  better  from  a  legal  standpoint  than  the  1913  act. 
So  far,  the  coal  companies  have  not  attacked  the  law,  and  it  is  conceded 
in  some  quarters  that  they  will  not  do  so.  Some  of  the  officials  at  the 
capitol,  who  do  not  care  to  be  quoted,  as  their  opinion  in  the  matter  will 
probably  be  asked  by  the  governor,  are  of  the  belief  that  there  never  will 
be  any  state  tax  collected  on  anthracite  in  Pennsylvania  until  there  is  a 
general  law  relating  to  bituminous  coal,  oil,  and  natural  gas.  Efforts  to 
put  through  such  a  measure  have  been  under  way  ever  since  Governor 
Tener's  tax  commission  made  numerous  recommendations  four  years  ago 
on  means  of  increasing  the  revenues.  This  state,  Ohio,  and  West  Vir- 
ginia have  never  been  able  to  come  to  an  understanding  regarding  a  tax 
on  soft  coal,  oil,  and  gas.  For  this  reason  it  has  been  deemed  not  ad- 
visable to  tax  natural  resources  of  western  Pennsylvania  which  are  found 
also  in  adjoining  states."  (Coal  Age,  1916,  X,  902). 

^Mineral  Resources  of  United  States,  1914,  p.  32.* 

"°Constitution  of  1868,  Art.  IX,  sec.  I. 

141Constitution  of  1895,  Art.  X,  sec.  I. 

It2/4fts  of  Gen.  Assembly,  1881-1882,  sec.  196. 


70  MINE  TAXATION  IN  THE  UNITED  STATES  [600 

Utah  enacted  laws  controlling  locations  upon  mineral  lands. 
Taxation  laws  were  enacted  in  1878. 

The  Constitution  was  adopted  November  5,  1895  and  Utah 
was  admitted  to  the  Union  January  4,  1896.  The  taxation  of  the 
net  proceeds  is  authorized  by  the  Constitution.144  In  1899  the 
assessment  of  the  net  proceeds  was  transferred  to  the  State  Board 
of  Equalization  by  action  of  the  state  legislature.  In  1905  when 
the  question  was  carried  to  the  state  supreme  court,  it  was  held 
that,  under  the  Constitution,  the  State  Board  of  Equalization 
could  not  legally  assess  the  net  proceeds  of  mines.  In  1908  the 
Constitution  was  amended  so  that  "the  net  annual  proceeds  of 
all  mines  and  mining  claims  '  '  shall  be  assessed  and  taxed  by  the 
State  Board  of  Equalization.145 

An  effort  was  made  in  1911  to  revise  the  system  of  taxation 
in  general  and  various  constitutional  amendments  were  proposed 
including  one  removing  the  provision  requiring  the  State  Board 
of  Equalization  to  tax  mining  machinery,  surface  improvements, 
and  net  proceeds  of  mines  and  removing  the  restriction  that 
claims  and  land  shall  be  taxed  at  the  price  paid  the  United  States 
for  the  land. 

All  of  these  amendments  were  defeated.146 

The  details  of  the  law  now  in  effect  in  Utah  are  given  in 
Chapter  IV.  The  State  Board  of  Equalization  recommended 
in  1912  that  the  law  taxing  the  net  proceeds  of  mines  be  made 
more  specific  and  that  taxes  and  insurance  be  legally  deduct- 
able  from  the  net  proceeds.  The  Attorney-General  also  pointed 
out  defects  in  the  law  and  urged  that  the  proposed  amendment 
be  resubmitted.147 

According  to  the  report  of  the  State  Board  of  Equalization 
the  important  points  of  difference  between  the  mining  compa- 
nies and  the  State  Board  of  Equalization  have  been  adjusted 
and  the  lawsuits  which  resulted  from  controversies148  over  the 


States  Geological  Survey,  Professional  Paper,  No.  77,  p.  16. 
See  also  Bancroft,  History  of  Utah,  p.  741. 

14*Art.  XIII,  sec.  4. 

1*5/&td.,  sec.  4. 

146It  was  claimed  that  the  State  Board  could  not  make  personal 
inspection  of  mining  property  as  frequently  as  the  county  assessor  could. 

147Report  of  Attorney-General,  1911-12,  p.  9. 

148In  a  suit  by  the  Utah  Copper  Co.  to  recover  an  excess  of  taxes 
levied  by  the  Board  of  Equalization  and  collected  by  the  county  treasurer, 
the  Judge  in  the  U.  S.  District  Court  instructed  the  jury  to  find  for  the 
mining  company,  the  amount  decreed  to  be  returned,  amounting  to 


601]  HISTORY  OP   STATE   TAXATION  71 

interpretation  of  the  law  have  determined  judicially  the  various 
points  at  issue.  "So  long  as  the  law  makers  of  the  State  shall 
consider  that  the  assessment  of  the  net  proceeds  of  a  mine  fairly 
represents  its  value  for  assessment  purposes,  a  fair  and  uni- 
form assessment  may  be  had  under  the  present  law."149  Addi- 
tional data  on  mine  taxation  in  Utah  may  be  found  in  the 
references  given  below.150 

On  November  7,  1916  there  was  submitted  to  the  voters  of 
Utah  for  their  approval  an  amendment  to  the  Constitution, 
being  a  proposed  change  of  Article  XIII  which  relates  to  tax- 
ation and  revenue.  The  most  important  part  of  the  proposed 
amendment  follows:  "In  addition  to  the  assessment  of  the 
surface  grounds,  improvements  and  machinery  of  mines  and 
mining  claims,  all  mines  and  mining  claims  producing  net  pro- 
ceeds shall  be  taxed  at  a  value  not  to  exceed  three  times  such  net 
products. ' '  This  amendment  was  defeated  at  the  polls. 

VIRGINIA 

Virginia  does  not  rank  high  as  a  producer  of  minerals,  the 
value  of  the  output  having  been  $14,995,842  in  1912,  $17,178,- 
580  in  1913,  and  $16,400,347  in  1914.181 

The  general  property  tax  has  been  employed  in  the  taxa- 
tion of  mines  and  the  assessing  of  mines  and  mineral  lands 
under  special  rules  is  authorized  by  the  Constitution.152  The 
legislature  by  an  Act  amended  in  1910  has  prescribed  how  the 

$29.444.  The  point  at  issue  was  the  allowance  of  expenditures  in  the 
development  of  mining  properties  and  the  providing  of  facilities  for  the 
handling  and  reducing  of  the  ores.  The  company  held  that  these 
expenditures  were  properly  to  be  deducted  from  the  gross  revenue, 
before  the  net  profits  could  be  established.  Engineering  and  Mining 
Journal,  1913,  XCV,  1119. 

149Report  State  Board  of  Equalization,  1913-1914,  p.  60. 

150Miscellaneous  articles  and  notes  on  Utah  mine  taxation : 

Thomas,  J.  J.    Taxation  of  mines  in  Utah  and  Nevada.    Proceedings 

of  National  Tax  Association,  1908,  II,  431. 
Bennion,   H.     Administrative  problems,   work   of   state   commissions 

and  state  tax  commissions  in  Utah.    Ibid.,  1914,  VIII,  in. 
Paterson,  O.  S.     Report  of  special  tax  commission  of  Utah.     Ibid., 

1912,  VI,  425. 

Unsigned  articles  and  notes : 
Engineering  and  Mining  Journal,  LXXXV,  229,  623;  XCV,  492,  119; 

XCVI,  1044. 

1B1Mineral  Resources  of  United  States,  1914.  P-  32.* 
"Constitution  of  1902,  Art.  XIII,  sec.  172. 


72  MINE  TAXATION  IN  THE  UNITED  STATES  [602 

appraisal  shall  be  made.153  The  assessment  was  formerly  made 
every  five  years  by  the  general  assessors;  now  an  annual  ap- 
praisal is  made  by  the  commissioner  of  revenues  in  the  district 
where  the  property  is  located,  with  the  assistance  of  a  special 
assessor  appointed  by  the  Corporation  Commission.154  As  a 
result  a  higher  valuation  of  mineral  land  has  resulted.  In  1906, 
the  956,155  acres  of  mineral  land  then  assessed  bore  an  assess- 
ment of  $8.13  per  acre;  in  1911,  the  acreage  was  2,438,887 
which  was  rated  at  $11.51  per  acre.  This  was  an  increase  of 
42  percent  which  may  be  compared  with  an  increase  in  valuation 
of  28  percent  for  farm  lands.155 

The  experience  of  Virginia  may  well  be  expressed  by  the 
statement  of  the  Joint  Committee  on  Tax  Eevision  reporting- 
to  the  Governor  of  Virginia,  November  1,  1914,  in  accordance 
with  instructions  of  the  legislature  of  1914,  as  follows: 

"Under  our  general  property  tax  system,  the  mineral  when 
produced  pays  on  an  assessment  greater  than  its  value  and  the- 
undeveloped  land  out  of  all  proportion  to  its  productive  value. 
Any  other  system  should  obviously  take  no  more  tax  from  the 
mineral,  and  would  necessarily  give  up  all  or  nearly  all  the 
tax  upon  undeveloped  land.  Nevertheless,  the  counties  and 
even  the  Commonwealth  can  not  forego  some  assessment  against 
these  lands."156 

WEST   VIRGINIA 

West  Virginia  is  an  important  producer  of  minerals,  rank- 
ing second  among  the  states  in  the  value  of  the  mineral  output. 
The  principal  mineral  products  are  coal,  petroleum,  and  natural 
gas.  In  1912  the  output  was  valued  at  $123,847,812,  in  1913 
at  $143,640,633,  and  in  1914  at  $134,071,803.157 

The  Constitution  provides  that  "taxation  shall  be  equal 
and  uniform  throughout  the  state,  and  all  property,  both  real 
and  personal,  shall  be  taxed  in  proportion  to  its  value. '  '158 

The  essential  features  of  the  laws  now  in  force  are  that 
real  property  is  assessed  locally  at  its  actual  value;  personal 
property,  including  machinery  and  stored  minerals,  is  assessed 
at  its  actual  value ;  leaseholds  in  coal,  oil,  gas,  or  other  mineral 

lssCode  of  Virginia,  sec.  4373. 

15*Laws  of  1912,  p.  162. 

1S6Report  of  Joint  Committee  on  Tax  Revision,  Virginia,  1914,  p.  29^ 

™«Ibid.,  p.  30. 

™7Mineral  Resources  of  United  States,  1914,  p.  32.* 

158Art.  X,  sec.  i. 


603]  HISTORY   OF    STATE   TAXATION  73 

substances  are  assessed  at  their  actual  value;  mineral  rights 
when  owned  separate  from  the  surface  are  assessed  at  actual 
value  to  their  owner.  When  land  increases  or  diminishes  as 
much  as  $100  on  account  of  the  development  or  exhaustion  of 
minerals,  a  corresponding  change  is  made  in  the  assessed 
valuation.159 

The  Tax  Commission  of  1902,  appointed  to  investigate  the 
tax  system  of  the  State,  reported  to  the  legislature  recommend- 
ing that  a  production  tax  be  levied  amounting  to  one-third  of 
a  cent  per  ton  on  each  ton  of  coal  manufactured  or  produced, 
the  proceeds  of  this  tax  to  be  used  for  State  purposes  alone.160 

The  attempts  made  during  the  session  of  the  legislature  in 
1903  to  enact  such  a  tax  on  production  failed.  Again  in  1907 
the  State  Tax  Commissioner  recommended161  to  the  legislature 
that  a  production  tax  be  employed  by  the  State.  No  action 
was  taken.  The  reasons  assigned  by  the  Tax  Commission162  for 
the  proposed  imposition  of  the  production  tax  were  as  follows: 

"FIRST :  The  nature  of  this  business  is  such,  that  the  State 
has  felt  called  upon  to  incur  a  very  considerable  annual  expense, 
in  order  that  the  business  may  be  carried  on  with  profit  to  the 
operators,  and  with  comparative  safety  to  the  miners.  To  this  end 
a  law  has  been  passed  in  the  interest  of  this  business.  Nine  inspect- 
ors were  appointed,  and  salaries  and  expenses  are  paid  by  the  State. 

"SECOND :  Three  Miners'  Hospitals  have  been  established, 
and  buildings  erected  in  mining  districts  of  the  State,  primarily  for 
the  purpose  of  caring  for,  and  treating  persons,  principally  miners, 
who  may  be  injured  in  and  about  the  operations  of  the  mines.  The 
expense  of  maintaining  these  hospitals  is  very  considerable  every  year. 

"THIRD :  The  State  at  very  considerable  expense  maintains  its 
militia  or  national  guard.  It  may  be  said  that  in  almost  every  case 
where  it  is  found  necessary  to  call  out  this  guard  for  the  preserva- 
tion of  the  domestic  peace  and  for  the  protection  of  property,  it  is 
owing  to  disturbances  in  the  mining  regions  of  the  States,  growing 
out  of  difficulties  or  disputes  between  the  operators  of  the  mines  and 
those  in  their  employ. 

"FOURTH :  Investigation  shows  that  the  criminal  charges  are 
much  larger  in  counties  where  large  mining  operations  are  carried 

™9Code  of  1906,  Sec.  723,  687,  688,  794. 

180ToWnsend,  T.  C.  Taxation  of  coal,  oil,  and  gas.  Proceedings 
National  Tax  Association,  1908,  II,  395. 

161Ibid.,  p.  398. 

162Second  Biennial  Report,  West  Virginia  Tax  Commission,  1907-8, 
P-  32. 


74  MINE  TAXATION  IN  THE  UNITED  STATES  [604 

on,  than  in  other  counties.  This  results,  it  is  believed,  from  the  large 
influx  into  such  counties  of  men  to  work  in  the  mines. 

"FIFTH:  It  will  be  admitted,  that  miners  and  others  employed 
about  the  mines,  pay  but  little  tax,  either  into  the  State,  or  county 
treasury;  and  that  very  often  the  operators  or  owners  of  the  mines 
reside  in  other  states,  and  pay  little  or  no  taxes  in  this  State.  The 
number  of  children  in  mining  communities  is  generally  large  in 
proportion  to  the  population.  For  work  in  the  mines,  large  numbers 
of  laborers,  many  of  them  illiterate,  are  brought  in  by  the  operators, 
and  the  burden  of  educating  the  young  is  thrown  upon  the  State, 
and  the  community.  The  operators  and  owners  of  the  mines  have 
a  special  interest  in  the  education  of  these  young  people,  and  being 
responsible  for  their  being  in  the  State,  it  is  thought  not  unjust, 
partly  in  consideration  of  this  fact,  that  the  small  tax  should  be  paid." 

In  1905  the  legislature  enacted  the  law  taxing  leaseholds. 
This  law  was  held  to  be  constitutional.163 

The  Tax  Commission  of  1902  endeavored  to  procure  legis- 
lation providing  for  a  production  tax  of  one-half  cent  per  bar- 
rel of  oil,  but  without  success.  The  difficulty  of  appraising  an 
oil  or  gas  property  is  apparent  and  in  the  opinion  of  the  West 
Virginia  Tax  Commission  a  production  tax  is  the  "most  feasi- 
ble, scientific,  and  common-sense  method ' '  that  can  be  devised.164 

On  the  contrary  Governor  Hatfield  went  on  record169  in  a 
special  message  to  the  legislature,  February  18,  1915,  as  not 
advocating  a  production  tax  on  coal,  oil,  and  gas.168 

WISCONSIN 

Mineral  lands  and  mines  of  Wisconsin  have  been  subject 
to  taxation  only  under  the  general  property  tax  and  the  income 
from  mines  has  been  taxable  as  other  income  under  the  income 
tax.  The  principal  problem  has  been  that  of  valuation  and 
appraisal  for  the  purpose  of  taxation. 

163Harvey  Coal  &  Coke  Co.  v.  C  W.  Dillon,  59  W.  Va.  605,  (1905). 
194Prospective  oil  and  gas  is  not  real  estate  until  brought  to  the  sur- 
face.   Carter  v.  Tyler,  32  S.  E.  216,  (1899). 
"'Public,  1915,  XVIII,  206. 

166Miscellaneous  references  on  mine  taxation  in  West  Virginia: 
Blue,  F.  O.     Notes  on  mine  taxation  in  West  Virginia,  Coal  Age, 

1913,  iv,  713- 

White,  A.  B.  Taxation  of  coal,  oil,  and  gas.  Second  Biennial 
Report,  W.  Va.  State  Tax  Commission,  1907-8,  p.  18. 

Editorial.  Values  assessed  without  seeing  the  properties.  Coal  and 
Coke  Operator,  1913,  XXXII,  47. 

Unsigned.  How  West  Virginia  coal  mines  pay  taxes.  Black  Dia- 
mond, 1916,  LVII,  347. 


605]  HISTORY  OP   STATE  TAXATION  75 

Lead  ore  was  discovered  in  "Wisconsin  as  early  as  1682,167 
but  lead  mining  was  not  begun  actively  on  a  substantial  basis 
until  Congress  authorized168  the  sale  of  the  lead  lands  of  the 
ivtississippi  Valley  in  1847.  Iron  ore  was  discovered  in  the 
Menominee  Range  in  1873,  on  the  Gogebic  Range  in  1883,  and 
on  the  Baraboo  Range  in  1900.  Wisconsin  was  admitted  to  the 
Union  May  27,  1848  and  adopted  the  system  of  taxing  all  prop- 
erty upon  the  ad  valorem  basis.  Broken  minerals  were  taxed 
as  personal  property.169 

The  law  in  effect  now  is  in  no  important  detail  different 
from  the  law  under  which  mines  have  been  taxed  since  the  state 
was  organized,  but  the  laws  regarding  the  assessment  and  valua- 
tion have  been  made  more  specific.170  In  1903  a  law  was  en- 
acted providing  for  the  taxation  of  mineral  rights.171 

In  1897  a  State  Tax  Commission  was  established172  and 
there  has  been  since  that  date  a  reorganization  and  development 
of  the  taxing  system  of  the  State,  with  a  tendency  toward 
centralization.173  The  first  assessment  of  mines  for  the  Tax 
Commission  was  made  in  1912.  In  1914  this  work  was  regu- 
larly authorized  by  law  and  it  is  now  done  by  the  State  Geolo- 
gist. The  appraiser  for  the  Tax  Commission  has  the  right  to 
make  a  reassessment  of  any  property  apparently  not  fairly 
appraised.  The  local  taxing  units  do  not  always  use  the  valua- 
tion of  the  Geological  Survey. 

Royalties  are  taxed  under  the  income  tax.174  At  the  pres- 
ent time  there  is  no  sentiment  in  Wisconsin  in  favor  of  a  state 
tonnage  tax.  In  1912  the  mineral  output  of  Wisconsin  was 

167Irving,  R.  D.  Mineral  resources  of  Wisconsin.  Trans.  Amer.  Inst. 
Min.  Engrs.,  1879,  VIII,  498. 

See  also   Wisconsin    Historical    Collection,  XIII,  271-293 ;    Trans. 
Wisconsin  Academy  of  Arts,  Science,  and  Letters,  XIII,  188; 
Geological  Survey    (Hall),  I,  73   (1862);  Schoolcraft,  H.   R., 
Narrative  Journal  of  Travels,  Albany,  1821. 
1689  U.  S.  Statutes  at  Large  179- 
189Palmer  v.  Corwith,  3  Pinney  267,  (1851). 

170Infra,  chapter  IV  on  laws  now  in  force  and  chapter  VII  for  details 
on  valuation. 

*71Laws  of  Wisconsin,  1903,  chap.  361;  1909,  chap.  61 ;  Ibid.,  1911, 
chap.  48,  sec.  IO42J. 

172Ibid.,  1897,  chap.  340. 

1787th  Biennial  Report  of  Wisconsin  Tax  Commission,  1914,  pp.  1-9. 
17*Laws  of  Wisconsin,  1911,  chap.  658,  amended  by  Laws  of  1913,  chap. 
27,  443,  487,  554,  615,  and  720. 


76  MINE  TAXATION  IN  THE  UNITED  STATES  [606 

valued  at  $14,192,287,  in  1913  at  $12,452,480,  and  in  1914  at 
$11,022,643,175  practically  25  percent  of  the  value  being  in  zinc. 
In  1914  the  mining  corporations  paid  income  tax  upon  a  tax- 
able income  amounting  to  $326,880.  The  average  rate  was 
.05452  and  the  total  tax  paid  was  $17,820.47.176  In  1915  a  law 
was  enacted  specifying  that  lead  and  zinc  mines  shall  be  as- 
sessed annually  at  one-fifth  of  the  market  value  of  the  ore 
mined  during  the  preceding  calendar  year.177 

WYOMING 

Wyoming  has  extensive  deposits  of  coal,  as  well  as  other 
mineral  resources  of  value,  although  the  state  has  never  ranked 
high  among  the  mineral  producers.  In  1912  the  value  of  the 
output  was  $13,374,088,  in  1913  it  was  $13,682,091,  and  in  1914, 
$12,417,752,  the  coal  product  representing  nearly  90  percent 
of  the  total.178 

The  Territory  of  Wyoming  was  organized  July  25,  1868, 
and  the  state  enacted  laws  for  the  location  of  mining  claims 
December  16,  1870.  In  1890  Wyoming  was  admitted  to  the 
Union  and  adopted  a  constitution  which  permitted  the  taxation 
of  mines  upon  the  gross  production  in  lieu  of  taxes  upon  lands. 
Surface  improvements  of  all  mining  property  are  taxed.179  All 
coal  lands  from  which  coal  is  not  being  mined  are  assessed  and 
taxed  according  to  their  value.180 

The  legislature  of  1903  provided  for  the  taxation  of  mines 
and  mineral  lands  upon  the  gross  product181  as  permitted  by 
the  constitution. 

In  1909  the  office  of  Commissioner  of  Taxation  was  created 
and  the  duty  of  appraising  the  value  of  the  gross  products  of 
mines  was  assigned  to  him.182  The  Report  of  the  Commissioner 

17SMineral  Resources  of  the  United  States,  1914,  P-  32*. 

l7KSeventh  Biennial  Report  Wisconsin  Tax  Commission,  1914,  p.  109. 

177La«tt  of  Wisconsin,  1915,  chap.  388. 

"^Mineral  Resource*  of  the  United  States,  1914,  P-  32*. 

1T9Constitution,  Art.  XV,  sec.  3. 

180/Hd.,  sec.  2. 

181Laws  of  Wyoming,  1903,  chap.  81,  sec.  I  to  6. 

192Ibid.,  1909,  chap.  66.  "The  present  method  of  the  assessment  of 
output  of  mines  is  unsatisfactory,  and  the  law  indefinite  and  conflicting. 
The  present  law  should  be  so  amended  that  there  can  be  no  question  as 
to  what  shall  be  assessed  and  as  to  how  it  shall  be  assessed  and  the  au- 
thority of  the  assessing  board  plainly  and  clearly  set  forth."  First  Bien- 
nial Report  of  Commissioner  of  Taxation,  1909-10,  p.  19. 


607]  HISTORY  OP   STATE  TAXATION  77 

of  Taxation  for  1911-1912  shows183  that  the  taxes  on  the  output 
of  mines  amounted  to  $38,894.51  in  1910;  $53,111.26  in  1911; 
and  $47,734.35  in  1912.18* 


p.  68. 

184The  value  of  the  output  in  1912  as  reported  by  the  United  States 
Geological  Survey  was  $13,374,088.  The  lowest  rate  applied  in  any  of 
the  mining  counties  was  7.47;  at  this  rate  the  tax  paid  should  have  been 
$99,904.44. 


CHAPTER   IV 

CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS 
Constitutional  Limitations 

An  examination  of  the  constitutions  of  the  states  shows  that 
no  restraint  has  been  placed  upon  the  classification  of  property 
for  taxation  in  Connecticut,  Maryland,  Minnesota,  New  Jersey, 
New  York,  Oklahoma,  Pennsylvania,  Rhode  Island,  and  Ver- 
mont.1 

Uniformity  of  taxation  on  all  property  in  the  same  class  is 
specified  by  the  constitutions  of  Arizona,  Colorado,  Delaware, 
Idaho,  Illinois,  Maryland,  Missouri,  Nebraska,  New  Mexico,  Okla- 
homa, Pennsylvania,  Virginia,  and  Wyoming. 

The  following  states  require  uniform  taxes  on  all  classes  of 
property:  Alabama,  Arkansas,  California,  Florida,  Indiana, 
Kansas,  Kentucky,  Louisiana,  Massachusetts,  Michigan  (except 
that  specific  taxes  are  authorized),  Minnesota,  Mississippi,  Mis- 
souri, Montana  (except  as  specified),  Nebraska,  Nevada  (except 
mines),  New  Jersey,  North  Carolina,  North  Dakota,  Ohio, 
Oregon,  South  Carolina,  South  Dakota,  Tennessee,  Texas,  Utah 
(except  mines),  Washington,  West  Virginia,  Wisconsin,  and 
Wyoming. 

The  method  of  taxing  mines  is  prescribed  in  the  constitutions 
of  Montana,  Nevada,  South  Carolina,  Utah,  and  Wyoming. 

The  legislatures  of  Michigan  and  Oklahoma  are  authorized 
by  the  constitution  to  levy  and  collect  specific  taxes.  The  legis- 
lature of  Louisiana  may  impose  license  taxes  upon  the  business 
of  mining. 

The  constitutions  of  thirty-two  states  practically  require  a 
uniform  method  of  valuing  property  for  taxation.2  The  consti- 
tution of  Virginia  authorizes  special  and  separate  assessment  of 
mineral  lands.  Unproductive  coal  land  in  Wyoming  must  be 
listed  and  taxed  as  provided  in  the  constitution. 

Most  of  the  state  constitutions  specify  that  taxes  shall  be 
uniform  and  that  all  property,  except  as  enumerated,  shall  be 

^Proceedings  National  Tax  Association,  1911,  V,  461. 
2Ibid.,  1911,  V,  451. 

78 


609]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  79 

subject  to  taxation.  The  constitution  of  Idaho  prescribes  that 
taxes  shall  be  uniform  upon  the  same  class  of  subjects,  ' '  provided 
the  legislature  may  allow  such  exemptions  from  time  to  time  as 
shall  seem  necessary  and  just."3 

Certain  of  the  Eastern  states  have  no  constitutional  require- 
ment that  all  property  shall  be  taxed.  The  statutes  of  Vermont, 
in  the  absence  of  specific  constitutional  restrictions  on  exemptions, 
authorize  municipalities  to  exempt  mines  from  taxation  for  a 
period  of  ten  years.4  In  general,  however,  the  present  day  ten- 
dency is  rather  to  select  mines  as  a  special  object  for  heavier  tax- 
ation than  to  exempt  them. 

Specific  reference  to  mines  is  made  in  the  constitutions  of 
the  following  states :  Louisiana,5  Montana,6  Nevada,7  Ohio,8  Okla- 
homa,9 South  Carolina,1'  Utah,11  Virginia,12  and  Wyoming.1* 

From  time  to  time  the  legislatures  of  the  various  states  have 
enacted  laws  providing  for  the  taxation  of  mines,  which  laws 
have  been  held  by  the  courts  to  be  in  conflict  with  the  Federal  or 
the  State  Constitution.  Among  the  most  important  of  the  laws 
that  have  been  held  unconstitutional  are  the  following: 

In  1867,  the  Nevada  law  taxing  proceeds  of  mines  was  de- 
clared unconstitutional.1* 

The  Pennsylvania  Act  of  1864,  levying  a  tax  of  two  cents  a 
ton  on  the  product  of  mines,  quarries,  and  clay-beds  was  held 
unconstitutional  in  1872.15 

Similarly,  the  tax  collected  of  railroads  in  Maryland  on  the 
tonnage  of  coal  handled  was  held  unconstitutional  in  1874.18 

In  1885,  the  Michigan  Supreme  Court  declared  unconstitu- 
tional the  law  imposing  a  tax  which  discriminated  between  ore 

3Idaho,  Constitution,  Art.  VII,  sec.  5. 
*Vermont,  Public  Statutes,   1906,  sec.  499. 
Constitution  of  Louisiana,  Art.  229. 
•Constitution  of  Montana,  Art.  XII,  sec.  3. 
'Constitution  of  Nevada,  Art.  X,  sec.  I. 
Constitution  of  Ohio,  Art.  XII,  sec.  10. 
Constitution  of  Oklahoma,  Art.  X,  sec.  12. 
1  Constitution  of  South  Carolina,  Art  X,  sec.  I. 
"Constitution  of  Utah,  Art.  XIII,  sec.  4. 
"Constitution  of  Virginia,  Art.  XIII,  sec.  172. 
"Constitution  of  Wyoming,  Art.  XV,  sec.  2,  3. 
14State  v.  Estabrook,  3  Nev.  156. 
"Reading  R.  Co.  v.  State  of  Pa.,  15  Wall.  232. 
"State  v.  Cumberland  &  P.  R.  Co.,  40  Md.  22. 


80  MINE  TAXATION  IN  THE  UNITED  STATES  [610 

smelted  in  the  State  and  that  shipped  to  smelters  outside  the 
state  as  being  in  restraint  of  interstate  commerce.17 

The  Minnesota  tonnage  tax  law  of  1881  was  declared  uncon- 
stitutional in  1896.18 

The  Utah  Act  of  1899,  placing  the  assessing  of  the  net  pro- 
ceeds of  mines  with  the  State  Board  of  Equalization  instead  of 
the  county  assessor  was  held  to  be  unconstitutional  in  1905. 

A  Louisiana  Act  of  1910  providing  for  a  conservation  fund 
and  authorizing  an  annual  license  tax  upon  those  engaged  in  the 
mining  business  was  declared  unconstitutional  as  the  measure  had 
been  enacted  by  the  legislature  before  the  amendment  to  the 
Constitution,  providing  for  such  legislation,  had  been  voted  upon 
by  the  people  of  the  state.19 

The  special  tax  on  anthracite  levied  by  the  Pennsylvania 
Assembly  in  1913  was  declared  unconstitutional  in  1915.20 

Statutory  Provisions 

The  following  state  legislatures  in  providing  laws  defining 
property  have  specified  mines  and  minerals : 

Alabama,  Arkansas,  California,  Colorado,  Connecticut, 
Idaho,  Illinois,  Indiana,  Kansas,  Minnesota,  Montana,  Nebraska, 
New  Mexico,  New  York,  North  Carolina,  North  Dakota,  Ohio, 
Oklahoma,  Oregon,  South  Carolina,  South  Dakota,  Tennessee, 
Texas,  Utah,  Vermont,  Virginia,  West  Virginia,  and  Wisconsin. 

The  following  note  specifically  that  mining  rights  shall  be 
taxed  to  the  owner  if  the  title  is  separate  from  the  surface :  Ala- 
bama, Arkansas,  Georgia,  Illinois,  Indiana,  Kansas,  Kentucky, 
Minnesota,  New  Hampshire,  New  Mexico,  North  Carolina,  North 
Dakota,  Ohio,  Vermont,  Virginia,  West  Virginia,  and  Wisconsin. 

There  is  special  legislation  on  the  methods  of  taxing  mines 
in  the  following  states:  Colorado,  Idaho,  Louisiana,  Montana, 
Nevada,  New  Mexico,  Oklahoma,  Pennsylvania,  South  Carolina, 
Utah,  Wisconsin,  and  Wyoming. 

Rules  for  assessing  and  listing  mining  property  are  speci- 
fied in  the  laws  of  Colorado,  Connecticut,  Idaho,  Michigan,  Min- 
nesota, Montana,  Nevada,  New  Mexico,  North  Dakota,  Ohio,  Okla- 
homa, South  Carolina,  Utah,  Vermont,  Virginia,  West  Virginia, 
Wisconsin,  and  Wyoming. 

"Jackson  Min.  Co.  v.  Auditor  General,  32  Mich.  488. 
^Report  of  Auditor  of  State  of  Minnesota,  1901-1902,  p.  vii. 
19Etchison  Drilling  Co.  v.  Flournoy,  59  Southern  867,  (1910). 
20Commonwealth  v.  Alden  Coal  Co.,  96  Atlantic  246,  (1915). 


611]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  81 

The  conditions  under  which  mining  property  may  be  exempt 
from  taxation  are  given  in  the  laws  of  Alabama,  Maine,  New 
Hampshire,  and  Vermont. 

Constitutional  and  Statutory 
Provisions  by  States 

No  attempt  has  been  made  to  assemble  all  the  constitutional 
provisions  and  statutory  enactments  that  apply  to  the  taxation 
of  mining  property  as  well  as  to  other  property,  but  rather  to 
present  those  that  are  of  particular  importance  in  the  study  of 
the  taxation  of  mining  property. 

ALABAMA 

Constitutional  Provisions 

Uniformity.  All  taxes  levied  on  property  shall  be  assessed 
in  exact  proportion  to  the  value  of  the  property.  (Art.  XI, 
sec.  211). 

The  property  of  private  corporations,  associations,  and 
individuals  shall  forever  be  taxed  at  the  same  rate.  (Art.  XI, 
sec.  217). 

Franchise  tax.  The  legislature  shall  provide  for  the  pay- 
ment of  a  franchise  tax  by  corporations  organized  under  the 
laws  of  Alabama,  which  shall  be  in  proportion  to  the  amount 
of  capital  stock.  (Art.  XIV,  sec.  229).  The  legislature  shall 
provide  for  the  payment  of  a  franchise  tax  by  foreign  corpora- 
tions, the  tax  being  based  on  the  actual  amount  of  capital 
employed  in  the  state.  (Art.  XIV,  sec.  232). 

Statutory  Provisions 

Mines  assessed.  Real  and  personal  property  estimated  at 
its  full  cash  value  by  assessor  upon  information,  inspection,  or 
otherwise  taking  into  consideration  mines,  minerals,  quarries, 
or  coal-beds  and  the  amount  and  character  of  improvements. 
(Code  of  Alabama,  1907,  chap.  45,  sec.  2112). 

Mineral  rights  assessed.  Mineral  interests  when  they  have 
been  severed  from  the  soil  by  sale  or  otherwise,  shall  be  sepa- 
rately assessed.  (Ibid.,  see.  2112).  Every  separate  or  special 
interest  in  any  land,  such  as  mineral,  when  such  interest  is 
owned  by  a  person  other  than  the  owner  of  the  soil,  shall  be 
assessed.  (Ibid.,  chap.  45,  sec.  2082). 

Franchise  tax.  All  domestic  mining  corporations  pay 
annually  a  privilege  tax  varying  from  $10.  on  paid-up  capital 


82  MINE  TAXATION  IN  THE  UNITED  STATES  [612 

stock  under  $10,000,  to  $500  on  paid-up  capital  over  $1,000,000. 
Ibid.,  chap.  45,  sec.  2361).  Foreign  mining  corporations  pay 
a  franchise  tax  on  capital  employed  in  the  state  at  the  following 
rate,  25  percent  on  the  first  $100,  5  percent  on  the  remainder 
of  the  first  $1000  and  then  1/10  percent  on  the  remainder. 
(Ibid.,  chap.  45,  sec.  2491).  In  addition  to  the  state  tax,  for- 
eign companies  pay  a  county  tax  equal  to  one-half  the  state  tax. 

Corporation  tax.  Shares  of  mining  companies  are  assessed 
and  taxes  collected  in  the  county  where  the  company  has  its 
home  office.  The  corporation  property  is  assessed  against  the 
corporation;  the  shares  are  assessed  in  the  name  of  the  share- 
holder at  their  actual  market  value  of  the  real  and  personal 
property  of  the  corporation.  The  corporation  pays  for  the 
shareholders,  respectively,  the  tax  assessed  against  the  shares. 
(Ibid.,  chap.  45,  sec.  2082). 

Exemptions.  Pig  iron  remaining  in  the  hands  of  the  manu- 
facturers on  the  first  day  of  October  of  any  year  following 
immediately  that  in  which  it  was  produced  is  exempt  from 
taxation.  (Ibid.,  chap.  45,  sec.  2061). 

ARIZONA 
Constitutional  Provisions 

Uniformity.  All  taxes  shall  be  uniform  upon  the  same 
class  of  property.  (Constitution,  Art.  IX,  sec.  1). 

All  property  not  exempt  shall  be  subject  to  taxation.  (Ibid., 
Art.  IX,  sec.  2). 

Assessing.  The  manner,  method,  and  mode  of  assessing, 
equalizing,  and  levying  taxes  shall  be  such  as  may  be  prescribed 
by  law.  Ibid.,  Art.  IX,  see.  11). 

Production  taxes.  The  legislature  may  provide  for  the  levy 
and  collection  of  production  taxes.  (Ibid.,  Art.  IX,  sec.  12). 

Statutory  Provisions 

Property.  All  property  of  every  kind  shall  be  subject  to 
taxation  but  double  taxation  is  not  permitted.  (Revised  Stat- 
utes, 1913,  Title  49,  chap.  IV,  sec.  4846).  Real  estate  includes 
ownership  of,  or  claim  to,  or  possession  of,  or  right  to  possession 
to,  any  land  or  patented  mine  within  the  state.  (Ibid.,  sec. 
4847).  "Personal  property"  includes  any  interest  or  equity 
in  or  valid  claim  to  non-patented  claims,  either  lode  or  placer. 
(Ibid.,  sec.  4847). 

Assessing.    Real  estate  and  improvements  shall  be  assessed 


613]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  83 

separately.     (Ibid.,  sec.  4847).     All  taxable  property  must  be 
assessed  at  its  full  cash  value.    (Ibid.,  sec.  4849) . 

Corporations.  An  annual  registration  fee  of  $15  is  charged 
for  state  purposes.  (Ibid.,  sec.  2274). 

ARKANSAS 

Constitutional  Provisions 

Property.  All  property  subject  to  taxation  shall  be  taxed 
according  to  its  value.  (Constitution,  Art.  XVI,  sec.  5). 

Uniform  assessment.  The  general  assembly  shall  provide 
by  law  for  the  assessment  of  property  according  to  its  value, 
so  that  the  assessment  shall  be  equal  and  uniform  throughout 
the  State.  (Ibid.,  sec.  5). 

Statutory  Provisions 

Property.  The  term  "real  property  and  lands"  includes 
not  only  the  land  itself,  but  also  all  improvements,  and  all  rights 
and  privileges  belonging  thereto.  (Statutes  of  Arkansas,  1904, 
chap.  137,  sec.  6872).  All  property,  real  and  personal,  shall  be 
subject  to  taxation.  (Ibid.,  sec.  6873). 

Capital-stock  tax.  All  corporations  pay  to  the  State  for 
State  purposes  a  tax,  levied  on  the  right  to  exist  as  a  corpora- 
tion, at  the  rate  of  one-fifteenth  of  one  percent  on  the  out- 
standing capital  stock  employed  in  the  State.  (Laws  of  Arkan- 
sas, 1913,  Act  122,  p.  518). 

CALIFORNIA 

Constitutional  Provisions 

Uniformity.  All  property  shall  be  taxed  in  proportion  to 
its  value,  to  be  ascertained  as  provided  by  law,  or  as  hereinafter 
provided.  Constitution  of  California,  Art.  XIII,  sec.  1). 

Exemptions.  The  power  of  taxation  shall  never  be  surren- 
dered or  suspended  by  any  grant  or  contract.  (Ibid.,  Art.  XIII, 
sec.  6). 

Incomes.  Incomes  may  be  taxed  as  prescribed  by  law. 
(Ibid.,  Art.  XIII,  sec.  11). 

Franchises.  All  franchises,  other  than  those  expressly  pro- 
vided for  in  this  section,  shall  be  assessed  at  their  actual  cash 
value,  in  the  manner  to  be  provided  by  law,  and  shall  be  taxed 
at  the  rate  of  one  per  cent  each  year,  and  the  taxes  collected 
thereon  shall  be  exclusively  for  the  benefit  of  the  state.  The 
rates  of  taxation  shall  remain  in  force  until  changed  by  the 
legislature,  two-thirds  of  all  the  members  of  each  of  the  two 


84  MINE  TAXATION  IN  THE  UNITED  STATES  [614 

houses  voting  in  favor  thereof.     (Ibid.,  sec.  14.    The  rate  in  this 
section  was  changed  by  the  legislature  in  1913  and  in  1915). 

Statutory  Provisions 

Uniformity.  All  property,  not  exempt,  is  subject  to  taxa- 
tion, but  nothing  in  the  code  shall  be  construed  to  require  or 
permit  double  taxation.  (Code  of  California,  Title  IX,  chap., 
sec.  3607). 

Assessment.  All  taxable  property  must  be  assessed  at  its 
full  cash  value.  (Ibid.,  Title  IX,  chap.  Ill,  sec.  3627). 

Mining  property.  The  term  "real  estate"  includes:  All 
mines,  minerals  and  quarries  in  and  under  the  land  and  all 
rights  and  privileges  appertaining  thereto.  (Ibid.,  Title  IX, 
chap.  II,  sec.  3617). 

Corporation  taxes.  Every  corporation  doing  intrastate  busi- 
ness within  the  state  of  California  shall  procure  annually  from 
the  secretary  of  state  a  license  authorizing  the  transaction  of  such 
business  and  shall  pay  therefor  a  license  tax.  This  tax  shall  be 
graduated  according  to  the  authorized  amount  of  capital  stock. 
When  the  authorized  capital  stock  does  not  exceed  ten  thousand 
dollars,  the  tax  shall  be  ten  dollars ;  when  the  authorized  capital 
stock  exceeds  ten  million  dollars  the  tax  shall  be  one  thousand 
dollars.  All  corporations  having  no  capital  stock  shall  pay  an 
annual  tax  of  ten  dollars.  (Laws  of  California,  1915,  chap.  190). 

Shares  of  stock  of  domestic  corporations  shall  be  exempt 
from  taxation.  All  property  belonging  to  corporations  shall 
be  taxed  as  is  other  property.  (Code  of  California,  Title  IX, 
chap.  I,  sec.  3608). 

Corporations  shall  pay  to  the  state  for  state  purposes  a  tax 
on  the  actual  cash  value  of  their  franchises. 

COLORADO 
Constitutional  Provisions 

Uniformity.  "All  taxes  shall  be  uniform  upon  the  same 
class  of  subjects  within  the  territorial  limits  of  the  authority 
levying  the  tax,  and  shall  be  levied  and  collected  under  general 
laws,  which  shall  prescribe  such  regulations  as  shall  secure  a 
just  valuation  for  taxation  of  all  property,  real  and  personal." 
(Constitution  of  Colorado,  Art.  X,  sec.  3). 

Exemptions.  All  laws  exempting  from  taxation  property 
other  than  hereinbefore  mentioned  shall  be  void.  (Ibid.,  Art. 
X,  sec.  9). 


615]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  85 

Statutory  Provisions 

Assessing  property  in  general.  All  taxable  property  shall 
be  listed  and  valued  each  year,  and  shall  be  assessed  at  its  full 
cash  value.  (Revised  Statutes,  1908,  sec.  5529).  In  assessing 
property,  except  as  provided,  the  market  value  shall  be  the 
guide.  (Ibid.,  sec.  5591). 

Mining  property.  Real  estate  includes  all  lands,  all  mines, 
minerals  and  quarries  in  and  under  the  laud,  and  all  rights  and 
privileges  appertaining  thereto,  and  improvements.  (Ibid.,  sec. 
5540).  The  possessory  right  to  unpatented  and  non-producing 
mines  is  subject  to  assessment.  (Laws  of  Colorado,  1915,  chap. 
138).  All  mines  and  mining  claims  bearing  "gold,  silver,  lead, 
copper,  and  other  precious  metals  or  valuable  minerals,  and 
possessory  rights  therein"  are  divided  into  two  classes, — pro- 
ducing and  non-producing.  Those  having  a  gross  annual  out- 
put of  less  than  five  thousand  dollars  are  classed  as  non- 
producing,  all  others  as  producing.  (Revised  Statutes,  1908, 
sec.  5618).  Producing  mines  of  coal,  iron,  asphaltum  and 
quarries  are  assessed  in  the  same  manner  as  other  property. 
(Ibid.,  sec.  5625). 

All  producing  metal  mines  or  possessory  rights  therein  are 
valued  for  taxation  at  one-fourth  of  their  gross  production 
unless  their  net  output  exceeds  one-fourth  in  which  case  the 
net  is  taken.  (Laws  of  Colorado,  1915,  chap.  138).  The  net 
proceeds  shall  be  determined  by  deducting  from  the  gross  value 
of  the  ore  produced,  the  actual  cost  of  extracting  from  the 
mine,  not  including  the  salaries  of  officers  not  actively  and 
consecutively  engaged;  the  actual  cost  of  transportation  to  the 
place  of  reduction  or  sale ;  and  the  actual  cost  of  treatment, 
reduction  or  sale.  (Laws  of  Colorado,  1915,  chap.  138). 

The  surface  improvements  of  all  mines  are  taxable  as  is 
other  property.  (Revised  Statutes,  1908,  sec.  5621). 

Any  number  of  contiguous  claims  owned  or  operated  as 
one  property  by  the  same  person,  persons,  association  or  corpo- 
ration, the  gross  production  of  which  shall  be  more  than  $5000 
per  annum,  shall  be  deemed  and  considered  one  producing  mine 
for  the  purposes  of  taxation.  (Laws  of  Colorado,  1915,  chap. 
138). 

Corporations.  Domestic  corporations  pay  for  state  pur- 
poses a  tax  of  two  cents  upon  each  one  thousand  dollars  of 
authorized  capital  stock.  (Revised  Statutes,  1908,  sec.  5595). 


86  MINE  TAXATION  IN  THE  UNITED  STATES  [616 

Foreign  corporations,  in  addition  to  other  taxes,  shall  pay 
a  license  fee  of  two  cents  upon  each  one  thousand  dollars  capital 
stock,  represented  by  its  property  and  assets  in  the  State. 
(Laws  of  Colorado,  1911,  chap.  260). 

CONNECTICUT 

Constitutional  Provisions 

Nothing  specific  on  mines  and  nothing  on  taxation. 
Statutory  Provisions 

Uniformity.  All  property  not  exempted  shall  be  taxed. 
(Public  Acts,  1909,  chap.  97,  p.  1024). 

Mining  property.  Quarries,  mines,  and  ore  beds  shall  be 
liable  to  taxation.  Whether  owned  in  fee  or  leased,  they  shall 
be  set  in  the  list  separately  at  their  present  true  and  actual 
valuations  and,  if  owned  by  a  corporation,  the  whole  stock 
property  and  franchise  shall  be  set  in  the  list  of  the  town  where 
such  quarry,  mine  or  ore  bed  is.  (Ibid.,  p.  1024). 

Corporation  license.  Shares  of  stock  in  mining  and  oil 
companies  may  not  be  sold  until  a  financial  statement  is  filed 
with  the  Secretary  of  State.  A  fee  of  twenty-five  dollars  is 
required.  This  applies  to  both  foreign  and  domestic  companies ; 
however,  companies  operating  wholly  within  the  State  are 
exempt.  (Ibid.,  1911,  chap.  232). 

DELAWARE 

Constitutional  Provisions 

Uniformity.  All  taxes  shall  be  uniform  upon  the  same  class 
of  subjects.  (Constitution,  Art.  VIII,  sec.  1). 

Exemptions.  The  general  assembly  may  by  general  laws 
exempt  from  taxation  such  property  as  in  the  opinion  of  the 
general  assembly  will  best  promote  public  welfare.  (Ibid.,  sec.  1). 

Statutory  Provisions 

Franchise  tax.  An  annual  franchise  tax  is  levied  upon  cor- 
porations, the  tax  varying  from  $5  on  a  capitalization  of  $25,000 
to  $50  on  $1,000,000  with  an  addition  of  $25  for  each  additional 
million  dollars  or  part  thereof.  (Laws  of  Delaware,  1915,  chap. 
6,  sec.  105).  Mining  corporations,  fifty  percent  of  whose  capital 
stock  actually  paid  in  is  invested  in  business  carried  on  within 
the  state,  and  which  is  subject  to  a  license  tax  for  carrying  on 
such  business,  are  exempt  from  this  tax.  Mining  companies  not 


617]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  87 

having  fifty  percent  so  invested  but  having  a  part  of  the  capital 
stock  invested  in  the  state,  are  entitled  to  a  deduction  of  the 
value  of  the  real  and  personal  property  used  in  mining  in  the 
state,  from  the  amount  of  the  capital  stock  issued  and  out- 
standing. 

Property  tax.  There  is  no  state  levy  on  general  property.  All 
real  property,  not  exempt,  is  subject  to  taxation  by  the  local 
units.  Real  and  personal  property  are  to  be  assessed  at  their 
true  value.  (Revised  Code,  chap.  X,  sec.  11). 

FLORIDA 

Constitutional  Provisions 

Uniformity.  The  legislature  shall  provide  for  a  uniform 
and  equal  rate  of  taxation.  Constitution,  Art.  IX,  sec.  1). 

Assessment.  The  legislature  shall  prescribe  such  regula- 
tions as  shall  secure  a  just  valuation  of  all  property,  both  real 
and  personal.  (Ibid.,  sec.  1). 

Statutory  Provisions 

Property  tax.  All  real  and  personal  property  not  exempt 
shall  be  subject  to  taxation.  (Laws  of  Florida,  1906,  sec.  428). 

Phosphate  license.  Owners  and  operators  of  phosphate 
plants  in  operation  shall  pay  twenty-five  dollars  for  every  plant 
in  operation.  (Ibid.,  sec.  453). 

GEORGIA 
Constitutional  Provisions 

Uniformity.  All  taxation  shall  be  uniform  on  the  same 
-class  of  subjects  and  ad  valorem  on  all  property  subject  to  be 
taxed  within  the  territorial  limits  of  the  authority  levying  the 
tax.  (Constitution,  Art.  VII,  sec.  2). 

Statutory  Provisions 

Property  tax.  Taxes  are  levied  on  the  ad  valorem  value 
of  property.  (Code  of  Georgia,  1910,  sec.  914). 

Uniformity.  All  taxation  shall  be  uniform  upon  the  same 
class  of  subjects  and  ad  valorem  on  all  property  subject  to  be 
taxed.  (Ibid.,  sec.  6553). 

Exemptions.  All  exemptions,  other  than  those  enumerated, 
shall  be  void.  (Ibid.,  sec.  6556). 

All  real  and  personal  property,  whether  owned  by  individ- 
uals or  corporations,  is  liable  to  taxation.  (Ibid.,  sec.  1002). 


88  MINE  TAXATION  IN  THE  UNITED  STATES  [618 

Mining  rights.  All  persons  owning  any  mineral  interests 
less  than  the  fee  shall  return  the  same  for  taxation  and  pay  the 
same  as  on  other  property.  (Ibid.,  sec.  1008). 

License.  Each  company  doing  business  in  the  State  shall 
pay  ten  dollars  a  year.  (Ibid.,  sec.  919).  All  corporations 
incorporated  under  the  laws  of  Georgia  shall,  in  addition  to 
all  other  taxes  now  required  by  law,  pay  each  year  an  annual 
license  or  occupation  tax  as  follows:  Capital  up  to  $10,000, 
the  sum  of  $5;  from  $10,000  to  $25,000,  the  sum  of  $10;  the 
rate  increases  up  to  $100  on  a  capitalization  in  excess  of  one 
million  dollars.  All  foreign  corporations  doing  business  in  the 
State  pay  a  similar  tax.  (Ibid.,  sec.  950  and  951). 

IDAHO 
Constitutional  Provisions 

Uniformity.  Taxes  shall  be  uniform  upon  the  same  class 
of  subjects  within  the  same  jurisdiction,  provided  the  legisla- 
ture may  allow  such  exemptions  from  time  to  time  as  shall 
seem  necessary  and  just.  Duplicate  taxation  of  property  for 
the  same  purpose  is  prohibited.  (Constitution,  Art.  VII,  sec.  5). 

Corporations.  The  power  to  tax  corporations  or  corporate 
property  shall  never  be  relinquished  or  suspended.  (Ibid.^ 
sec.  8). 

Statutory  Provisions 

Property  tax.  Real  property  includes  lands,  improvements^ 
fossils,  and  quarries  in  and  under  the  land.  (Laws  of  Idaho, 
1913,  chap.  58,  sec.  6).  Personal  property  includes  equities  and 
easements.  (Ibid.,  chap.  58,  sec.  7).  Mining  companies  pay 
locally  taxes  for  state  and  local  purposes  on  land,  improvements^ 
and  machinery.  (Revised  Code,  1908,  sec.  1863). 

Assessing  property.  Mining  claims  not  patented  are  ex- 
empt from  taxation.  (Laws  of  Idaho,  1913,  chap.  58,  sec.  4). 
All  mines  and  mining  claims,  both  placer  and  rock  in  place, 
containing  or  bearing  gold,  silver,  copper,  lead,  coal,  or  other 
valuable  mineral  or  metal  deposits,  after  purchase  thereof  from 
the  United  States,  shall  be  taxed  at  the  price  paid  the  United 
States  therefor,  unless  the  surface  ground,  or  some  part  thereof 
is  used  for  other  than  mining  purposes.  That  part  of  the  ground 
used  for  other  purposes  shall  be  taxed  at  its  value  for  such 
other  purposes.  (Revised  Code,  1908,  sec.  1863).  Machinery 
and  improvements  on  mines  and  mining  claims  are  not  exempt- 
(Ibid.,  sec.  1863). 


619]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  89 

Net  profits.  In  addition  to  property  taxes  on  surface  and 
improvements,  all  mines,  patented  and  unpatented,  pay  a  tax  on 
net  profits.  (Ibid.,  see.  1863).  To  determine  the  "net  profits", 
deductions  are  made  from  the  gross  receipts  as  follows: 

The  actual  expenditure  of  money  and  labor  in  extracting 
the  product  from  the  mine,  of  transporting  it  to  the  mill,  con- 
centrator, or  reduction  works,  and  the  conversion  of  the  same 
into  money  or  its  equivalent,  and  also  the  deduction  of  all 
moneys  expended  for  necessary  labor,  machinery  and  supplies 
needed  and  used  in  the  mining  operations,  for  the  improve- 
ments necessary  in  and  about  the  mine  or  claim,  for  reducing 
ores,  for  the  construction  of  the  mills  and  reduction  works 
used  and  operated  in  connection  with  the  mine  or  claim,  for 
transporting  the  ore,  and  for  extracting  the  metals  and 
minerals  therefrom;  but  the  money  invested  in  the  mine,  or 
improvements  made  during  any  year,  except  the  year  im- 
mediately preceding,  must  not  be  included.  Such  expendi- 
tures do  not  include  the  salaries  or  any  portion  thereof,  of  any 
person  or  officer  not  actually  engaged  in  the  working  of  the 
mine,  or  personally  superintending  the  management.  (Ibid., 
sec.  1864). 

Every  person  or  corporation  engaged  in  mining  is  required 
to  file  with  the  county  assessor  an  annual  statement,  under  oath, 
of  net  profits.  (Ibid.,  sec.  1865). 

License  tax.  All  mining  companies  owning  productive 
mines,  pay  to  the  State  a  graduated  (from  $10  on  $5,000  or  less 
capitalization  to  $150  for  over  $2,000,000)  license  tax.  (Laws 
of  Idaho,  1912,  chap.  6).  Non-productive  mining  corporations 
are  exempt. 

ILLINOIS 

Constitutional  Provisions 

Uniformity.  Every  person  and  corporation  shall  pay  a 
tax  in  proportion  to  the  value  of  property  owned.  (Consti- 
tution, Art.  IX,  sec.  1). 

Franchises.  The  legislature  shall  have  power  to  tax  per- 
sons or  corporations  owning  or  using  franchises  and  privileges 
in  such  manner  as  it  shall  from  time  to  time  direct  by  general 
law,  uniform  as  to  the  class  upon  which  it  operates.  (Ibid., 
Art.  IX,  sec.  1). 

Exemption.  Exemption  from  taxation  shall  be  by  general 
law  only.  (Ibid.,  Art.  IX,  sec.  3). 


90  MINE  TAXATION  IN  THE  UNITED  STATES  [620 

Personal  property.  "From  and  after  the  date  when  this 
section  shall  be  in  force  the  powers  of  the  General  Assembly  over 
the  subject  matter  of  the  taxation  of  personal  property  shall  be 
as  complete  and  unrestricted  as  they  would  be  if  sections  one, 
three,  nine,  and  ten  of  this  article  of  the  constitution  did  not 
exist ;  provided,  however,  that  any  tax  levied  upon  personal  prop- 
erty of  the  same  class  within  the  jurisdiction  of  the  body  impos- 
ing the  same,  and  all  exemptions  from  taxation  shall  be  by  gen- 
eral law,  and  shall  be  revocable  by  the  General  Assembly  at  any 
time."  (Ibid.,  Art.  IX,  sec.  14.  Adopted  November  7,  1916). 

Statutory  Provisions 

Property  tax.  In  valuing  any  real  property  in  which  there 
is  a  coal,  or  other  mine  or  stone  or  other  quarry,  the  same  shall 
be  valued  at  such  a  price  as  such  property,  including  the  mine 
or  quarry,  would  sell  at  a  fair,  voluntary  sale  for  cash. 
(Revised  Statutes,  chap.  120,  sec.  4). 

Any  mining  right  or  the  right  to  dig  for  or  to  obtain  iron, 
lead,  coal,  or  other  mineral  from  land,  when  separated  from 
the  title  to  the  surface,  shall  be  taxable  separately.  (Ibid., 
chap.  94,  sec.  6  and  7). 

Capital  stock  tax.  Domestic  corporations  are  subject  to 
assessment  on  the  excess  value  of  capital  stock  over  tangible 
property.  The  value  of  the  capital  stock  is  based  on  a  consider- 
ation of  the  market  value  of  the  shares  or  on  the  value  as 
reported  to  the  State  by  the  corporations,  and  on  such  other 
information  as  may  be  obtained.  To  the  total  value  of  the 
shares  is  added  the  bonded  and  other  indebtedness  except  that 
incurred  for  current  expenses.  The  equalized  tangible  value 
is  deducted  from  this  amount  and  one-third  of  the  remainder 
is  taxed  for  state  and  local  purposes  as  is  other  property. 
(Revised  Statutes,  chap.  120). 

INDIANA 
Constitutional  Provisions 

Uniformity.  The  General  Assembly  shall  provide  for  a 
uniform  and  equal  rate  of  assessment  and  taxation  of  all 
property,  both  real  and  personal,  excepting  such  only  as  shall 
be  exempt  by  law.  (Constitution,  Art.  X,  sec.  193). 

Statutory  Provisions 

Property  tax.  In  valuing  any  real  property  on  which 
there  is  a  coal  or  other  mine,  or  stone  or  other  quarry,  the  same 


621]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  91 

if  the  land  and  the  mine  or  quarry  are  owned  by  the  same 
person,  shall  be  valued  at  its  true  cash  value.  If  the  mine  or 
quarry  is  owned  or  leased  by  a  person  other  than  the  owner 
of  the  land,  such  mine  or  quarry  and  all  improvements  and 
leasehold  and  appurtenances  shall  be  valued  separately  from 
the  land  according  to  the  true  cash  value.  (Revised  Statutes, 

1908,  sec.  10259). 

Capital  stock  excess.  Every  mining  company  must  file 
annually  a  sworn  statement  of  the  amount  of  its  capital  sto.ck. 
In  all  cases  where  the  market  value  of  the  capital  stock  exceeds 
the  value  of  the  tangible  property  listed  for  valuation,  then 
such  excess  value  shall  be  subject  to  taxation.  (Ibid.,  sec. 
10233,  10234). 

IOWA 

Constitutional  Provisions 

Uniformity.  The  general  assembly  shall  not  grant  to  any 
citizen  or  class  of  citizens,  privleges  or  immunities,  which  upon 
the  same  term  shall  not  equally  belong  to  all  citizens.  (Consti- 
tution, Art.  I,  sec.  6). 

Corporations.  The  property  of  all  corporations  for 
pecuniary  profit  shall  be  subject  to  taxation  the  same  as  that  of 
individuals.  (Ibid.,  Art  VIII,  sec.  2). 

Statutory  Provisions 

Assessing.  All  property  subject  to  taxation  shall  be  valued 
at  its  actual  value,  and  shall  be  assessed  at  25  percent  of  its 
actual  value.  (Code  of  Iowa,  1897,  sec.  1305). 

KANSAS 
Constitutional  Provisions 

Uniformity.  The  legislature  shall  provide  for  a  uniform 
and  equal  rate  of  assessment  and  taxation.  (Constitution,  Art. 
XI,  sec.  202). 

Statutory  Provisions 

Property  tax.  All  property,  real  and  personal,  not  ex- 
pressly exempt,  shall  be  subject  to  taxation.  (General  Statutes, 

1909,  sec.  9214). 

Real  estate  includes  not  only  the  land  but  buildings, 
improvements,  mines,  minerals,  quarries,  mineral  springs  and 
wells,  and  rights  and  privileges  appertaining  thereto.  (Ibid., 
sec.  9215). 


92  MINE  TAXATION  IN  THE  UNITED  STATES  [622 

Where  the  fee  to  the  surface  of  any  tract  or  lot  of  land 
is  in  any  person  or  persons,  natural  or  artificial,  and  the  right 
or  title  to  any  minerals  therein  is  in  another  or  in  others,  the 
rights  to  such  minerals  shall  be  valued  and  listed  separately 
and  the  land  and  said  right  to  the  minerals  shall  be  separately 
taxed  to  the  respective  owners.  (Ibid.,  sec.  9334).  Reserves 
or  leases  not  recorded  in  ninety  days  shall  be  void.  (Ibid., 
sec.  9334). 

Assessing.  The  assessor,  from  actual  view,  from  consulta- 
tion with  the  owners  or  agent  thereof  and  from  such  other 
sources  of  informataion  as  are  within  his  reach  shall  determine 
the  true  value  of  the  property  in  money.  (Ibid.,  sec.  9322). 

Capital  stock.  Capital  stock,  undivided  profits,  and  all 
other  assets  of  corporations  are  subject  to  taxation  as  personalty. 
(Ibid.,  sec.  9215). 

KENTUCKY 

Constitutional  Provisions 

Uniformity.  Taxes  shall  be  uniform  upon  all  property  of 
the  same  class  subject  to  taxation  within  the  territorial  limits 
of  the  authority  levying  the  tax.  (Amendment  adopted  Novem- 
ber 2,  1915). 

The  General  Assembly  shall  have  power  to  divide  property 
into  classes  and  to  determine  what  class  or  classes  of  property 
shall  be  subject  to  local  taxation.  (Amendment  adopted 
November  2,  1915). 

Assessing.  Property  shall  be  assessed  at  its  fair  cash  value. 
(Constitution,  sec.  172). 

Exemptions.  The  power  to  tax  shall  not  be  surrendered 
by  grant  or  contract.  (Ibid.,  sec.  175). 

Statutory  Provisions 

Property  tax.  All  property  shall  be  subject  to  taxation 
and  shall  be  assessed  at  its  fair  cash  value.  (Code  of  Kentucky, 
1909,  sec.  4020). 

Real  estate  includes  all  lands  and  improvements  thereon. 
(Ibid.,  sec.  4022).  Mineral  rights  or  coal,  oil,  or  gas  privileges 
by  lease  or  otherwise  or  any  interest  therein  in  Kentucky,  other 
than  the  county  in  which  said  owners  reside,  or  if  they  should 
reside  out  of  the  State,  shall  be  listed  for  taxation  personally 
in  the  county  where  situated.  (Ibid.,  sec.  4039). 

License  tax.  An  annual  state  license  tax  is  imposed  upon 
corporations  amounting  to  30  cents  on  each  $1000  of  that  part 


623]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  93 

of  their  authorized  capital  stock  represented  by  property  owned 
in  the  State.    (Ibid.,  sec.  4189  a— i). 

LOUISIANA 

Constitutional  Provisions 

Uniformity.  Taxation  shall  be  equal  and  uniform  on  all 
property  in  the  same  taxing  district.  (Constitution,  Art.  225). 

License  tax.  The  General  Assembly  may  levy  license  taxes. 
Those  engaged  in  the  business  of  severing  natural  resources, 
such  as  minerals  and  timber  from  the  soil  whether  they  there- 
after convert  them  by  manufacturing  or  not,  may  also  be 
rendered  liable  to  a  license  tax,  but  in  this  case  the  amount 
to  be  collected  may  either  be  graduated  or  fixed  according  to 
the  quantity  or  value  of  the  product  at  the  place  where  it  is 
severed.  (Constitution  of  1913,  Art.  229).  No  political  corpora- 
tion shall  impose  a  greater  license  tax  than  is  imposed  by  the 
General  Assembly  for  State  purposes. 

Statutory  Provisions 

Property  tax.  The  term  "property"  includes  all  real 
estate,  improvements,  rights,  personal  property  and  shares  of 
stock.  (Laws  of  Louisiana,  1898,  Act  170,  p.  346).  All  property 
shall  be  valued  at  actual  cash  value.  (Ibid.,  p.  346). 

License  tax.  Each  person  or  association  of  persons,  firms, 
or  corporations  pursuing  the  business  of  severing  natural 
products,  including  all  forms  of  timber,  turpentine,  and 
minerals  including  oil,  gas,  sulphur  and  salt  from  the  soil  shall 
pay  an  annual  license  tax  amounting  to  one-half  of  one  percent 
of  the  gross  value  of  the  total  production,  less  the  royalty 
interest  accruing  to  the  owner.  The  value  of  all  products 
shall  be  computed  at  the  place  where  they  are  taken  from  the 
soil.  (Ibid.,  1912,  Act  209,  sec.  1  and  2). 

A  similar  license  tax  may  be  imposed  by  the  Police  Juries 
of  the  several  parishes,  provided  the  amount  of  the  license  tax 
shall  not  exceed  the  amount,  which  is,  or  may  be,  similarly 
levied  by  the  State  of  Louisiana.  (Ibid.,  1914,  Act  296,  sec.  1). 

MAINE 
Constitutional  Provisions 

Uniformity.  All  taxes  upon  real  and  personal  estate,  shall 
be  apportioned  and  assessed  equally,  according  to  the  just  value 
thereof.  (Constitution,  Art.  IX,  sec.  8). 


94  MINE  TAXATION  IN  THE  UNITED  STATES  [624 

Exemptions.  The  legislature  shall  never  in  any  manner, 
suspend  or  surrender  the  power  of  taxation.  (Ibid.,  sec.  9). 

Statutory  Provisions 

Property  tax.  Real  estate  includes  the  land,  improvements, 
and  all  interests.  (Revised  Statutes,  1903,  chap.  9,  sec.  3). 
Mines  of  gold,  silver  or  of  the  baser  metals  when  opened  and 
in  process  of  development  are  exempt  from  taxation  for  ten 
years  from  the  time  of  such  opening.  But  this  exemption  does 
not  affect  the  taxation  of  the  lands  or  the  surface  improvements 
of  the  same  at  the  same  rate  of  valuation  as  similar  lands  and 
buildings  in  the  vicinity.  (Ibid.,  chap.  9,  sec.  6). 

Corporations.  Mining  companies  are  taxed  locally  upon 
their  property.  Shares  of  capital  stock  in  such  corporations 
are  not  taxed  to  the  owners.  Bonds  and  other  securities  are 
taxed.  (Ibid.,  chap.  9,  sec.  25). 

MARYLAND 

Constitutional  Provisions 

Uniformity.  The  General  Assembly  shall,  by  uniform  rules, 
provide  for  separate  assessment  of  land  and  classification  and 
sub-classifications  of  improvements  on  land  and  personal 
property  as  it  may  deem  proper;  and  all  taxes  thereafter  pro- 
vided to  be  levied  by  the  state  for  the  support  of  the  general 
state  government,  and  by  the  counties  and  by  the  City  of  Balti- 
more for  their  respective  purpose,  shall  be  uniform  as  to  land 
within  the  taxing  district,  and  uniform  within  the  class  or  sub- 
class of  improvements  on  land  and  personal  property  which 
the  respective  taxing  powers  may  have  directed  to  be  subjected 
to  the  tax  levy.  (Declaration  of  Rights,  Art.  XV). 

Statutory  Provisions 

Property  tax.  All  property  of  every  kind  shall  be 
assessed  for  the  purpose  of  taxation.  (Code  of  Maryland,  1911, 
Art.  81,  sec.  2).  Property  shall  be  assessed  at  full  cash  value. 
(Ibid.,  sec.  4).  Shares  shall  not  be  taxed  when  the  property 
they  represent  is  taxed  locally.  (Ibid.,  sec.  4). 

Corporation  tax.  Every  ordinary  business  corporation  shall 
be  subject  to  taxation  upon  its  property,  real  and  personal, 
which  would  be  taxable  in  this  State  if  such  Corporation  were 
a  natural  person  and  engaged  in  a  similar  business.  (Acts  of 
Maryland,  1914,  chap.  324,  sec  88-C). 


625]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  95 

Bonus  tax.  Every  corporation  of  this  State  having  a 
capital  stock,  except  railroads  and  building  or  homestead 
associations,  shall,  at  the  time  of  incorporation,  pay  for  the  use 
of  the  State  a  bonus  tax  at  the  rate  of  twenty  cents  for  every 
thousand  dollars  of  the  amount  of  its  authorized  capital  stock, 
but  in  no  case  shall  such  payment  be  less  than  twenty  dollars. 
(Ibid.,  sec  88-A). 

Annual  franchise  tax.  Every  ordinary  business  corpora- 
tion of  Maryland  shall  pay  annually  to  the  State  Treasurer  an 
annual  tax  for  its  franchise  to  be  a  corporation  graduated 
according  to  the  capital  stock.  (Ibid.,  sec.  88-D).  Foreign 
mining  corporations  pay  a  license  tax  graduated  according  to 
the  amount  of  capital  employed  in  the  State.  (Ibid.,  1908, 
chap.  240,  p.  53). 

MASSACHUSETTS 

Constitutional  Provisions 
Nothing  specific  on  mines. 

Statutory  Provisions 

Uniformity.  All  property  shall  be  subject  to  taxation. 
(Revised  Laws,  1902,  chap.  12,  sec.  2). 

Capital  stock.  Domestic  mining  and  quarrying  companies 
pay  semi-annually  a  tax  of  1/20  of  one  percent  on  the  par 
value  of  the  whole  amount  of  capital  stock.  (Ibid.,  chap.  XIV., 
sec.  49).  Foreign  companies  pay  semi-annually  1/40  of  one 
per  cent.  In  no  case  is  the  tax  more  than  $300.  The  value  of 
the  real  and  personal  property  is  deducted  from  the  par  value 
of  the  stock. 

Net  profits.  Domestic  mining  and  quarrying  companies 
are  required  to  pay  a  tax  of  four  percent  upon  net  profits 
estimated  from  reports  filed  with  the  tax  commissioner.  (Ibid., 
chap.  XIV.,  sec.  51). 

MICHIGAN 

Constitutional  Provisions 

Uniformity.  The  legislature  shall  provide  an  uniform 
rule  of  taxation,  except  on  property  paying  specific  taxes,  and 
taxes  shall  be  levied  on  such  property  as  prescribed  by  law. 
(Constitution,  Art.  XIV,  sec.  11). 

Specific  taxes.  The  State  may  continue  to  collect  all 
specific  taxes  accruing  to  the  treasury  under  existing  laws.  The 
legislature  may  provide  for  the  collection  of  specific  taxes  from 


96  MINE  TAXATION  IN  THE  UNITED  STATES  [626 

banking,  railroad  and  other  corporations  hereinafter  created. 
(Ibid.,  Art.  XIV,  sec.  10). 

Assessing.  Property  shall  be  assessed  at  its  cash  value. 
(Ibid.,  Art.  XIV,  sec.  12). 

Statutory  Provisions 

Property  tax.  All  property  real  and  personal,  within  the 
jurisdiction  of  the  State,  not  expressly  exempted,  shall  be 
subject  to  taxation.  (Compiled  Laws  of  Michigan,  1897, 
sec.  3824). 

Real  property  includes  all  lands,  buildings,  fixtures,  and 
appurtenances  thereto,  except  as  expressly  exempted  by  law. 
(Ibid.,  sec.  3825). 

Assessing.  Real  property  shall  be  assessed  in  the  township 
or  place  where  situated.  (Ibid.,  sec.  3826).  Personal  property 
includes  moneys,  annuities,  royalties,  shares,  all  interests  in 
land,  all  improvements  on  leased  lands,  except  where  the  value 
of  the  real  property  is  also  assessed  to  the  lessee  or  owner  of 
such  buildings  and  improvements.  (Ibid.,  sec.  3831). 

MINNESOTA 

Constitutional  Provisions 

Uniformity.  All  taxes  shall  be  as  nearly  equal  as  possible 
and  all  property  on  which  taxes  are  to  be  levied  shall  have  a 
cash  valuation  and  be  equalized  and  uniform  throughout  the 
state.  (Constitution,  Art.  IX,  sec.  1).  All  real  and  personal 
property  shall  be  subect  to  taxation  at  its  true  value  in  money. 
(Ibid.,  Art.  IX,  sec.  3). 

Statutory  Provisions 

Assessing.  All  property  shall  be  assessed  at  its  true  and 
full  value  in  money.  (General  Statutes,  1913,  sec.  1987). 

In  valuing  real  property  on  which  there  is  a  mine  *  or 
quarry,  the  same  shall  be  valued  at  such  a  price  as  such  property 
including  the  mine  or  quarry  would  bring  at  a  fair  voluntary 
sale  for  cash.  (Ibid.,  sec.  1987). 

Real  property  includes  the  land  itself,  buildings,  improve- 
ments, and  all  rights  and  privileges  appertaining  thereto,  and 
all  mines,  minerals,  quarries,  fossils  on  or  under  the  same. 
(Revised  Laws,  1905,  sec.  796).  Minerals  rights  owned 
separately  from  the  surface  may  be  assessed  and  taxed  separately 
from  such  surface  rights.  (Laws  of  Minnesota,  1905,  chap.  161). 


627]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  97 

Classification  and  valuation  of  property.  All  real  and 
personal  property  subject  to  a  general  property  tax  and  not 
subject  to  any  gross  earnings  or  other  lieu  tax  is  hereby  classi- 
fied for  purposes  of  taxation  as  follows : 

Class  1 :  Iron  ore  whether  mined  or  unmined  shall  consti- 
tute class  one  (1)  and  shall  be  valued  and  assessed  at  fifty  (50) 
percent  of  its  true  and  full  value.  If  mined,  it  shall  be  assessed 
with  and  as  a  part  of  the  real  estate  in  which  it  is  located,  but 
at  the  rate  aforesaid.  The  real  estate  in  which  iron  ore  is 
located,  other  than  the  ore,  shall  be  classified  and  assessed  in 
accordance  with  the  provisions  of  classes  three  (3)  and  four  (4) 
as  the  case  may  be.  In  assessing  any  tract  or  lot  of  real  estate 
in  which  iron  ore  is  known  to  exist  the  assessable  value  of  the 
ore  exclusive  of  the  land  in  which  it  is  located,  and  the  assessable 
value  of  the  land  exclusive  of  the  ore  shall  be  determined  and 
set  down  separately  and  the  aggregate  of  the  two  shall  be 
assessed  against  the  tract  or  lot.  (Laws  of  Minnesota,  1913, 
chap.  483). 

Money  and  credits.  "Money"  and  "credits"  are  hereby 
exempted  from  taxation  other  than  that  imposed  by  this  act  and 
shall  hereafter  be  subject  to  an  annual  tax  of  three  mills  on 
each  dollar  of  the  fair  cash  value  thereof.  (Laws  of  Minnesota, 
1911,  chap.  285,  sec.  1). 

"Credits"  shall  mean  and  include  every  claim  and  demand 
for  money  or  other  valuable  things,  and  every  annuity  or  sum 
of  money  receivable  at  stated  periods.  (Revised  Laws,  1905, 
sec.  798). 

All  taxes  paid  to  the  county  treasurer  under  the  provisions 
of  this  act  shall  be  apportioned,  one-sxth  to  the  revenue  fund  of 
the  State  of  Minnesota,  one-sixth  to  the  county  revenue  fund, 
one-third  to  the  city,  village,  or  town  and  one-third  to  the  school 
district  in  which  the  property  is  assessed.  (Laws  of  Minnesota, 
1911,  chap.  285,  sec.  13). 

MISSISSIPPI 

Constitutional  Provisions 

Uniformity.  Taxation  shall  be  uniform  and  equal  through- 
out the  State.  Property  shall  be  taxed  in  proportion  to  its  value. 
Property  shall  be  assessed  by  uniform  rules  according  to  its 
value.  (Constitution,  sec.  112). 

Corporations.  The  legislature  may  provide  for  a  special 
mode  of  valuation  and  assessment  of  corporate  property,  but 
all  such  property  shall  be  assessed  at  its  true  value.  (Ibid., 


98  MINE  TAXATION  IN  THE  UNITED  STATES  [628 

sec.  112).  The  property  of  all  private  corporations  for 
pecuniary  gain  shall  be  taxed  in  the  same  way  and  to  the  same 
extent  as  the  property  of  individuals.  (Ibid.,  sec  180). 

Statutory  Provisions 

Assessing.  Property  shall  be  valued  on  a  full  cash  basis. 
(Code  of  Mississippi,  1906,  chap.  122,  sec.  4268). 

Corporations.  Corporations  pay  a  property  tax  on  their 
lands  which  are  assessed  the  same  as  land  of  individuals.  The 
capital  stock  is  assessed  at  market  value  and  an  allowance  is 
made  for  property  taxed.  (Ibid.,  sec.  4267). 

MISSOURI 
Constitutional  Provisions 

Uniformity.  Taxes  shall  be  uniform  upon  the  same  class 
of  subjects  within  the  territorial  limits  of  the  authority  levying 
the  tax.  (Constitution,  Art.  X,  sec.  3). 

Property  tax.  All  property  subject  to  taxation  shall  be 
taxed  in  proportion  to  its  value.  (Ibid.,  Art.  X,  sec.  4). 

Exemptions.  All  laws  exempting  property,  other  than  as 
enumerated,  shall  be  void.  (Ibid.,  Art.  X,  sec.  7).  The  power 
to  tax  corporations  and  corporate  property  shall  not  be  sur- 
rendered or  suspended  by  act  of  the  General  Assembly.  (Ibid., 
Art.  X,  sec.  2). 

Corporation  fee.  All  corporations  upon  organization  under 
the  laws  of  the  State  shall  pay  a  graduated  fee.  (Ibid.,  Art.  X, 
sec.  21). 

Statutory  Provisions 

Property  tax.  Taxes  shall  be  levied  on  all  property,  real 
and  personal,  except  as  stated.  (Revised  Statutes,  1909,  sec. 
11334). 

Assessing.  All  property  of  all  mining  corporations  shall 
be  assessed  and  taxed  in  their  corporate  names.  (Ibid., 
sec.  11357). 

MONTANA 

Constitutional  Provisions 

Uniformity.  Taxes  shall  be  uniform  on  the  same  class  of 
subjects  in  the  same  jurisdiction.  (Constitution,  Art.  XII,  sec. 
11).  The  legislature  shall  levy  a  uniform  rate  of  assessment. 
All  property  shall  be  taxed  at  its  true  value.  (Ibid.,  Art.  XII, 
sec.  1). 


629]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  99 

Licenses.  The  legislature  may  impose  a  license  tax  upon 
persons  and  corporations  doing  business  in  the  State.  (Ibid., 
Art.  XII,  sec.  1). 

Corporations.  The  power  to  tax  corporations  shall  not  be 
suspended.  (Ibid.,  Art.  XII,  sec.  7). 

Mineral  property.  Mining  claims  including  those  con- 
taining gold,  silver,  copper,  lead,  coal,  or  other  valuable  mineral 
deposits,  after  purchase  from  the  United  States  shall  be  taxed 
at  the  price  paid  the  United  States  therefor  when  used  for 
mining  purposes.  Any  part  used  for  other  purposes  shall  be 
taxed  at  its  value  for  such  other  purposes  as  provided  by  law. 
(Ibid.,  Art.  XII,  sec.  3). 

All  machinery  used  in  mining  and  all  property  and  surface 
improvements  which  have  a  separate  value  from  such  mines  or 
mining  claims  shall  be  taxed  as  provided  by  law.  (Ibid.,  Art. 
XII,  sec.  3).  Annual  net  proceeds  of  all  mines  and  mining 
claims  shall  be  taxed  as  provided  by  law.  (Ibid.,  Art.  XII, 
sec.  3). 

Statutory  Provisions 

Property  tax.  All  property  is  subject  to  taxation  except 
as  exempt.  (Revised  Code  of  Montana,  1907,  sec.  2498). 

Real  estate  includes  all  mines,  minerals  and  quarries  in 
and  under  the  land.  (Ibid.,  sec.  2501).  Improvements  on 
mining  claims  are  not  exempt  from  taxation.  (Ibid.,  sec.  2570). 

Property  tax.  All  property  is  subject  to  taxation  except 
ceeds  at  the  same  rate  applied  to  property.  The  local  assessors 
determine  the  net  proceeds  by  deducting  from  the  value  of 
the  output  the  actual  cost  of  extracting  from  the  mine,  the 
actual  cost  of  transportation  to  the  place  of  reduction  or  sale, 
the  actual  cost  of  reduction  or  sale,  and  the  cost  of  repairs  and 
necessary  construction  about  the  mine,  mill,  and  reduction 
works.  No  deduction  is  made  for  the  salaries  of  officers  not 
actually  engaged  in  the  working  of  the  mine.  (Ibid.,  sec. 
2562  to  2571). 

NEBRASKA 

Constitutional  Provisions 

Uniformity.  Taxes  shall  be  uniform  as  to  class  and  in 
proportion  to  value.  (Constitution,  Art.  IX,  sec.  1). 

Statutory  Provisions 
Property  tax.    Heal  estate  shall  include  all  mines,  minerals, 


100  MINE  TAXATION  IN  THE  UNITED  STATES  [630 

quarries,  mineral  rights,  mineral  springs,  and  wells,  and  all 
privileges  pertaining  thereto.  (Revised  Statutes,  1903,  sec. 
10400).  Property  of  companies  and  mines  shall  be  listed  and 
taxed  where  located.  (Ibid.,  sec.  10403). 

NEVADA 
Constitutional  Provisions 

Uniformity.  The  legislature  shall  provide  by  law  for  a 
uniform  and  equal  rate  of  assessment  and  taxation,  and  shall 
prescribe  such  regulations  as  shall  secure  a  just  valuation  for 
taxation  of  all  property,  real,  personal  and  possessory,  except 
mines  and  mining  claims.  (Constitution,  Art.  X,  sec.  1). 

Mines  and  mining  claims.  Mines  and  mining  claims,  not 
patented,  shall  be  taxed  upon  the  proceeds  alone.  When 
patented,  each  mine  shall  be  assessed  at  not  less  than  five 
hundred  dollars  except  when  one  hundred  dollars  in  labor  has 
been  actually  performed  on  such  patented  mine  during  the 
year,  in  addition  to  the  tax  upon  net  proceeds.  (Ibid.,  Art.  X, 
sec.  1). 

Statutory  Provisions 

Assessment  of  patented  mines.  The  term  ' '  patented  mine ' ' 
as  used  in  the  Nevada  act  means  "each  separate,  whole  or 
fractional  patented  mining  location  whether  such  whole  or 
fractional  mining  location  be  covered  by  an  independent  patent 
or  be  included  under  a  single  patent  with  other  mining 
locations".  (Laws  of  Nevada,  1915,  chap.  206,  sec.  1).  Each 
patented  mine  shall  be  assessed  at  not  less  than  five  hundred 
dollars,  except  where  one  hundred  dollars  in  labor  has  been 
actually  performed  upon  such  patented  mine  during  the  calendar 
year  for  which  assessment  is  levied,  in  addition  to  the  tax  on 
the  net  proceeds  (Ibid.,  sec.  2).  The  county  assessor  shall  assess 
each  patented  mine  in  his  county  at  not  less  than  five  hundred 
dollars.  (Jbid.,  sec.  3). 

The  owner  of  two  or  more  contiguous  patented  mines  may 
perform  all  the  work  required  by  Article  X  of  the  constitution 
upon  one  mine  only;  provided,  the  aggregate  amount  of  such 
work  shall  be  equal  to  one  hundred  dollars  for  each  of  such 
contiguous  patented  mines.  (Ibid.,  sec.  9). 

Net  proceeds  and  surface  improvements.  Surface  improve- 
ments and  net  proceeds  are  taxed  at  the  same  rate  as  property 
in  general,  payable  quarterly.  (Revised  Laws,  sec.  3622,  3687). 
The  Tax  Commission  ascertains  the  proceeds  by  deducting  from 


631]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  101 

the  gross  yield  only  such  actual  costs  of  extraction  from  the 
mine,  of  milling  and  concentrating,  of  transportation,  reduc- 
tion, and  sale  as  shall  be  deemed  by  said  commission  to  be  just, 
proper  and  reasonable,  and  not  introduced  to  deprive  or  defraud 
the  State  of  any  portion  of  its  just  revenue.  In  any  suit  at 
law  arising  under  the  provisions  of  this  section,  the  burden  of 
proof  shall  be  upon  the  owner  of  such  mine  to  establish  that 
any  item  of  cost  disallowed  by  the  commission  is  nevertheless 
just,  reasonable  and  proper  and  not  entered  to  defraud  the 
State.  (Laws  of  Nevada,  1915,  chap.  153,  sec.  13). 

NEW  HAMPSHIRE 

Constitutional  Provisions 

Uniformity.  The  general  court  shall  have  power  to  levy 
proportional  and  reasonable  assessments,  rates,  and  taxes  upon 
all  persons  and  estates  within  its  limits.  (Part  2,  Art.  5). 

Statutory  Provisions 

Property  tax.  Real  estate  shall  be  taxed  independently  of 
any  mines  or  ores  contained  therein  until  such  mines  or  ores 
shall  become  a  source  of  profit.  (Public  Statutes,  1901,  Title 
IX,  chap.  55,  sec.  4). 

When  mines,  ore,  or  rights  therein  are  owned  by  a  person 
other  than  the  one  to  whom  the  real  estate  belongs,  they  are 
taxed  separately  as  real  estate.  (Ibid.,  Title  IX,  chap.  58, 
sec.  2). 

Corporation.  Stock  in  corporations  in  the  State  shall  be 
taxed  except  where  the  property  represented  by  the  stock  is 
taxable  directly  to  the  corporation.  (Ibid.,  Title  IX,  chap.  55, 
sec.  7). 

Stock  in  corporations  located  out  of  the  State,  owned  by 
persons  living  in  the  State,  shall  be  taxed  except  where  either 
the  stock  or  the  property  represented  by  it  is  taxed  in  the  towns 
or  states  where  the  corporations  are  located.  (Ibid.,  Title  IX, 
chap.  55,  sec.  7). 

NEW  JERSEY 

Constitutional  Provisions 

Uniformity.  Property  shall  be  assessed  for  taxes  under 
general  laws  and  by  uniform  rules,  according  to  its  true  value. 
(Constitution,  Art.  IV,  sec.  7). 


102  MINE  TAXATION  IN  THE  UNITED  STATES  [632 

Statutory  Provisions 

Property  tax.  All  property  not  exempt  shall  be  taxable 
at  its  true  value.  (Compiled  Statutes  of  New  Jersey,  1910, 
IV,  5076). 

All  property  shall  be  valued  by  assessors  of  the  respective 
taxing  districts.  (Ibid.,  p.  5076). 

Franchise  tax.  All  corporations  pay  annually  a  graduated 
license  fee  or  franchise  tax  on  the  amounts  of  capital  stock 
issued  and  outstanding.  This  does  not  apply  to  mining 
companies  having  at  least  fifty  percent  of  their  capital  invested 
in  the  State.  (Laws  of  New  Jersey,  1906,  chap.  19). 

NEW  MEXICO 
Constitutional  Provisions 

Uniformity.  Taxes  upon  tangible  property  shall  be  in 
proportion  to  the  value  thereof  and  taxes  shall  be  equal  and 
uniform  upon  subjects  of  taxation  of  the  same  class.  (Consti- 
tution, Art.  VIII,  sec.  1). 

Statutory  Provisions 

Mining  claims.  No  tax  shall  be  assessed,  levied  or  collected 
upon  any  mining  claim,  located  under  the  mining  laws  of  the 
United  States,  nor  upon  any  shaft  or  workings  therein,  until 
after  patent  shall  have  been  duly  issued  therefor  by  the  United 
States,  and  for  one  year  thereafter;  but  nothing  herein  con- 
tained shall  be  held  or  construed  to  exempt  from  taxation,  as 
provided  by  law,  the  improvements  upon  any  such  mining 
claim,  other  than  the  shafts  and  other  workings  as  aforesaid, 
nor  the  net  product  of  any  such  mining  claim.  (New  Mexico 
Statutes,  chap.  CVII,  sec.  1). 

Valuation.  It  shall  be  the  duty  of  the  county  assessor  to 
fix  the  valuation  of  all  property  (listed  for  taxation)  at  one- 
third  of  the  actual  cash  value  thereof  in  accordance  with  the 
standards  of  valuation  of  the  different  classes  of  property  as 
fixed  by  the  county  commissioners,  (nid.,  sec.  11). 

Classification.  For  the  purpose  of  taxation  all  mines, 
mining  claims  or  mineral  lands  held  for  mining  purposes 
situated  in  New  Mexico  shall  be  divided  into  two  classes,  as 
follows : 

1.  Productive  mines  and  mineral  lands. 

2.  Non-productive  mines  and  mineral  lands. 


633]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  103 

Productive  mines  and  mineral  lands  shall  be  such  as  are 
mined  in  good  faith  for  the  mineral  values  thereof,  with  a  fair 
degree  of  continuity  throughout  the  year  for  which  the  same  are 
assessed  and  on  a  scale  reasonably  commensurate  with  the 
opportunity  and  difficulty  of  disposing  of  the  product  thereof. 
All  other  mines,  mining  claims  and  mineral  lands  shall  be 
assessed  as  non-productive.  (Laws  of  New  Mexico,  1915,  chap. 
LV,  sec.  1). 

Net  proceeds.  Every  person,  corporation  or  association 
of  persons,  engaged  in  the  actual  mining  of  gold,  silver,  copper 
coal,  lead,  or  other  valuable  mineral  deposit  concerning  the 
operation  of  each  mine  or  group  of  mines  worked  by  such 
person,  corporation,  or  association  during  the  year  next  pre- 
ceding and  giving  a  statement  of  the  product  from  such  mines 
or  mineral  lands.  This  shall  "include  a  true  and  correct  state- 
ment and  account  of  the  actual  expenditures  of  money  and 
labor  in  extracting  such  ore  or  mineral  from  the  mine  or  mineral 
lands  and  of  transporting  the  same  to  the  mill  or  other  treat- 
ment or  reduction  or  refining  works,  the  cost  of  preparation, 
treatment,  reduction,  refining  and  handling  of  the  same  and 
conversion  thereof  into  money  or  its  equivalent"  and  any  other 
information  which  may  be  required  by  the  State  Tax  Commission 
and  which  would  be  of  benefit  or  advantage  to  such  Commission 
in  ascertaining  the  net  value  of  such  production.  (Ibid.,  sec.  2). 

"The  State  Tax  Commission  must  from  such  statement 
or  such  other  information  as  it  can  procure  determine  the  net 
value  in  dollars  of  the  output  of  each  of  such  mines  during 
the  previous  year.  The  amount  of  such  valuation  shall  be  taken 
and  considered  and  assessed  as  in  lieu  of  the  assessable  value 
of  the  mineral  in  such  mine,  mining  claim  or  claims,  or  mineral 
land  from  which,  or  any  portion  of  which,  such  mineral  shall 
have  been  extracted;  and  such  net  value  of  said  mineral  so 
extracted  shall  be  taxed  at  the  same  rate  as  other  properties  are 
taxed  in  the  county,  and  other  subdivision  in  which  such  mine 
is  situated,  and  the  taxes  levied  therein  shall  be  considered  as 
taxes  upon  such  mineral  values  in  said  lands.  By  the  'net 
value'  of  mineral  output,  as  such  term  is  herein  used,  is  meant 
the  difference  between  the  actual  cost  of  production,  transpor- 
tation, treatment,  shipment  and  sale  of  same,  including  coke, 
made  from  coal,  and  the  amount  realized,  if  sold,  or  which 
could  be  realized  at  the  time  of  making  such  report  by  the  sale 
of  the  same,  not  to  be  less,  however,  in  either  event,  than  the 
true  market  value  thereof."  (Ibid.,  sec.  4). 


104  MINE  TAXATION  IN  THE  UNITED  STATES  [634 

Improvements.  "Nothing  contained  in  this  act  must  be 
construed  to  exempt  from  taxation  any  improvements,  buildings, 
erections,  structures,  or  machinery  placed  upon  any  mine  or 
mining  claim,  or  used  in  connection  therewith  or  used  in  the 
transportation,  reduction  or  refining  of  the  product  thereof,  or 
to  exempt  from  taxation  any  value  which  any  mining  claim  or 
mineral  lands  may  have  for  other  than  mining  purposes,  but 
all  such  buildings,  erections,  structures  and  machinery  and  all 
grazing,  building  and  other  surface  values  of  said  mining 
claims  or  mineral  lands  shall  be  assessed  and  taxed  in  the 
same  manner  as  other  property  of  like  kind."  (Ibid.,  sec.  7). 

Non-productive  patented  mining  claims.  "All  non-produc- 
tive patented  mining  claims  and  other  non-productive  mineral 
lands  known  to  contain  valuable  deposits  of  coal,  ores  or  other 
minerals,  in  commercially  workable  quantities,  shall  be  assessed 
and  taxed  upon  the  reasonable  valuation  thereof  as  undeveloped 
mineral  lands  in  addition  to  their  surface  value  for  grazing, 
agriculture,  timber,  or  other  purposes.  In  fixing  such  valua- 
tion, it  shall  be  the  duty  of  the  taxing  officials  to  take  into 
consideration  the  transportation  facilities,  distance  from  rail- 
roads, and  opportunity  for  marketing  the  product  of  such 
mining  claims  or  mineral  lands."  (Ibid.,  sec.  8). 

Mineral  rights.  "In  cases  where  the  minerals  or  mineral 
rights  in  the  land  belong  to  owners  other  than  the  owners  of 
the  land  and  such  ownership  is  shown  by  deeds  duly  recorded 
in  the  office  of  the  county  recorder  of  the  county  in  which  such 
land  is  situated,  such  minerals  or  mineral  rights  shall  be 
assessed  separately  against  the  owners  thereof  and  the  taxes 
thereon  shall  not  be  a  lien  upon  the  land;  and  the  taxes  upon 
such  land  shall  not  be  a  lien  upon  such  separately  owned  mineral 
or  mineral  rights."  (Ibid.,  sec.  8). 

Mine  accounts.  "In  order  that  all  such  facts  so  required  to 
be  contained  in  such  statement  may  be  accurately  determined 
and  verified,  it  shall  be  the  duty  of  such  person  or  corporation 
to  keep  and  preserve  at  the  mining  place,  or  principal  office, 
thereof  in  this  state  accurate  and  permanent  accounts  showing 
in  detail  all  and  singular  the  various  items  of  expense  entering 
into  the  costs  of  production,  transportation,  treatment,  milling, 
refining  and  sales,  and  also  the  amounts  realized  from  the  sale 
of  all  and  any  portion  of  such  mineral  and  the  product  thereof 
and  the  State  Tax  Commission  shall  have  power  to  prescribe- 
the  method  of  keeping  such  accounts."  (Ibid.,  sec.  2). 


635]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  105 

In  making  the  statement  of  expenditures  mentioned  in 
the  preceding  section  there  shall  not  be  included  therein  any 
amounts  expended  for  machinery,  or  other  improvements,  or 
appliances  for  such  mining  operations  or  for  improvements 
made  for  the  purposes  of  reducing  or  refining  such  mineral, 
or  for  the  construction  of  mills  or  other  reduction  works, 
including  coke  ovens,  and  washeries  or  improvements  made  for 
transporting  of  such  mineral,  but  all  expenditures  made  for 
any  and  all  such  improvements,  structures,  buildings  or  other 
facilities  shall  be  considered  as  part  of  the  capital  account  of 
such  mining  operations  and  as  no  part  of  the  operating  expense 
thereof.  Such  expenditures  shall  not  include  the  salaries,  or 
any  portion  thereof,  of  any  person,  or  officer,  not  actually 
engaged  in  the  working  of  such  mine,  or  in  the  reduction,  trans- 
portation, sale  or  refinement  of  such  mineral,  or  personally 
superintending  the  management  thereof.  (Ibid.,  sec.  3). 

Corporations.  The  owner  or  holder  of  stock  in  any  firm 
or  corporation  shall  not  be  assessed  individually  for  the  stock, 
if  the  entire  capital  or  property  represented  by  the  stock  has 
been  taxed.  (New  Mexico  Statutes,  chap.  CVII,  sec.  14). 

NEW  YORK 
Constitutional  Provisions 

Nothing  specific  on  mines. 

Statutory  Provisions 

Property  tax.  Real  estate  includes  land,  improvements, 
and  all  mines,  minerals,  quarries,  and  fossils  in  and  under  the 
same,  except  mines  belonging  to  the  State.  (Laws  of  New  York, 
1909,  chap.  62,  sec.  3).  All  real  property  within  the  State,  and 
all  personal  property  situated  or  owned  within  the  State,  is 
taxable,  unless  exempt  from  taxation  by  law.  (Ibid.,  sec.  3). 

Personal  property  of  mines  is  taxable  locally.  (Ibid.,  chap. 
62,  sec.  5). 

Capital-stock  tax. — The  capital  stock  of  every  company 
liable  to  taxation,  except  such  part  of  it  as  shall  have  been 
excepted  in  the  assessment-roll  or  shall  be  exempt  by  law,  to- 
gether with  the  surplus  profits  or  reserve  funds  exceeding  ten 
percent  of  its  capital,  after  deducting  the  assessed  value  of  its 
real  estate,  and  all  shares  of  stock  in  other  corporations  actually 
owned  by  such  company  which  are  taxable  upon  their  capital 
stock  under  the  laws  of  this  State,  shall  be  assessed  at  its  actual 
value.  (Ibid.,  sec.  12). 


106  MINE  TAXATION  IN  THE  UNITED  STATES  [636 

Domestic  mining  companies  having  more  than  forty  percent 
of  their  capital  stock  invested  in  the  State  are  exempt  from  the 
capital-stock  tax.  The  rate  of  this  tax  varies  according  to  net 
assets,  market  price  of  the  stock,  and  dividends  paid.  (Ibid., 
chap.  62,  sec.  182  and  183). 

Franchise  tax.  Domestic  mining  companies  having  more 
than  forty  percent  of  their  capital  stock  invested  in  the  State 
are  exempt  from  the  capital-stock  tax.  The  rate  of  this  tax 
varies  according  to  net  assets,  market  price  of  the  stock,  and 
dividends  paid.  (Ibid.,  chap.  62,  sec.  182  and  183). 

NORTH   CAROLINA 

Constitutional  Provisions 

Uniformity.  Taxation  shall  be  by  uniform  rule  of  all  real 
and  personal  property  according  to  its  true  value  in  money. 
(Constitution,  Art.  V,  sec.  3). 

Income  tax.  The  legislature  may  tax  incomes,  but  not  both 
property  and  income.  (Ibid.,  Art.  V,  sec.  3). 

Statutory  Provisions 

Assessing.  Eeal  property  shall  be  valued  according  to  its 
true  value  in  money,  considering  the  mines,  minerals,  quarries 
or  other  valuable  deposits  known  to  be  available  therein  and 
their  value.  (Revised  Statutes,  sec.  5203).  Real  property  in- 
cludes land,  improvements  and  all  rights  and  privileges  and  all 
estates  therein.  (Laws  of  North  Carolina,  1903,  chap.  251). 
Mineral  rights  severed  from  the  surface  shall  be  assessable  to 
the  owner  of  the  mineral  rights.  (Ibid.,  1913,  chap.  203,  sec. 
32). 

Capital  stock.  Every  mining  corporation  shall  pay  to  the 
state  treasurer  annually  a  tax  upon  each  one  hundred  dollars 
of  the  actual  value  of  its  whole  capital  stock.  (Revised  Stat- 
utes, 1905,  sec.  5108).  As  applied  to  domestic  corporations,  the 
tax  is  based  on  issued  and  outstanding  capital  stock,  and  as 
applied  to  foreign  corporations  it  is  based  on  the  proportion  of 
capital  stock  represented  by  property  owned  and  used  and  busi- 
ness transacted  in  the  State. 

NORTH   DAKOTA 

Constitutional  Provisions 

Uniformity.  Taxes  shall  be  uniform  upon  the  same  class 
of  property.  (Constitution,  sec.  176). 


637]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  107 

Assessing.  All  taxable  property,  except  as  hereinafter  in 
this  section  provided,  shall  be  assessed  in  the  county,  city,  town- 
ship, village,  or  district  in  which  it  is  situated,  in  the  manner 
prescribed  by  law.  The  property,  including  franchises  of  all 
companies  or  corporations  operating  in  this  state  and  used 
directly  or  indirectly  in  the  carrying  of  persons,  property  or 
messages,  shall  be  assessed  by  the  State  Board  of  Equalization 
in  a  manner  prescribed  by  such  State  Board  as  may  be  provided 
by  law.  (Ibid.,  sec.  179). 

Statutory  Provisions 

Uniformity.  All  property  in  the  State  shall  be  subject  to 
taxation.  (Revised  Code,  1905,  sec.  1481). 

Property  tax.  All  property  shall  be  assessed  at  its  full 
value  in  money.  (Ibid.,  sec.  1512).  Real  property  includes 
lands,  improvements,  and  all  mines,  minerals,  and  quarries  in 
and  under  the  same  and  all  rights  and  privileges  appertaining 
thereto.  (Ibid.,  sec.  1482). 

Assessors  shall  assess  each  division  of  lignite  coal  and  min- 
erals (separate  mineral  right)  in  the  county  in  which  it  actually 
lies  when  the  ownership  is  severed  from  that  of  the  surface, 
whether  the  minerals  are  known  to  exist  or  not.  (Laws  of  North 
Dakota,  1911,  chap.  297). 

OHIO 

Constitutional  Provisions 

Uniformity.  All  property  shall  be  taxed  according  to  a 
uniform  rule  at  its  true  cash  value.  (Constitution,  Art.  XII, 
sec.  2). 

Corporation.  Corporate  property  shall  forever  be  taxed 
like  the  property  of  individuals.  (Ibid.,  Art.  XII,  sec.  4). 

Mines.  Laws  may  be  passed  providing  for  the  imposition 
of  taxes  upon  the  production  of  coal,  oil,  gas,  and  other  miner- 
als. (Ibid.,  Art.  XII,  sec.  10). 

Statutory  Provisions 

Property  tax.  All  property  shall  be  subject  to  taxation. 
(General  Code,  1910,  sec.  5328). 

Real  property  includes  not  only  land,  but  all  improvements 
and  all  rights.  (Ibid.,  sec.  5322).  Property  shall  be  assessed 
at  its  true  value  in  money.  Mineral  rights,  separately  owned 
from  the  surface,  shall  be  assessed  and  taxed  independently  of 
the  surface  and  against  the  owner  of  the  rights.  (Ibid.,  sec. 


108  MINE  TAXATION  IN  THE  UNITED  STATES  [638 

5560-5563).  If  the  value  of  any  petroleum,  oil,  and  natural 
gas  wells,  coal  and  ore  mines,  limestone  quarries,  fire-clay  pits, 
or  works  of  any  kind  designed  for  the  production  of  mineral 
of  any  kind  increases  or  diminishes  in  value  $100  from  the 
valuation  in  the  quadrennial  assessment,  the  assessor  may  make 
corrections  annually  when  he  lists  personal  property.  (Ibid., 
sec.  5562). 

Capital-stock  tax.  All  corporations,  except  public  utility 
companies  and  certain  financial  companies,  pay  to  the  State  for 
state  purposes  a  tax  of  three-twentieths  of  one  percent  on  the 
par  value  of  outstanding  stock  of  domestic  corporations  and 
on  the  proportion  of  the  authorized  capital  stock  of  foreign 
corporations  represented  by  property  owned  and  used  in  busi- 
ness transacted  in  Ohio.  (Ibid.,  sec.  5381-5386). 

OKLAHOMA 

Constitutional  Provisions 

Uniformity.  Taxation  shall  be  uniform  on  the  same  class 
of  subjects.  (Constitution,  Art.  X,  sec.  5). 

Assessing.  All  property  which  may  be  taxed  ad  valorem 
shall  be  assessed  for  taxation  at  its  fair  cash  value,  estimated 
at  the  price  it  would  bring  at  a  fair  voluntary  sale.  (Ibid., 
Art.  X,  sec.  8).  Nothing  in  the  Constitution  shall  be  construed 
to  prevent  taxation  of  different  classes  of  property  by  different 
means  or  methods.  (Ibid.,  Art.  X,  sec.  22). 

Specific  taxes.  The  legislature  shall  have  power  to  provide 
for  the  levy  and  collection  of  license,  franchise,  gross  revenue, 
income  and  graduated  income  taxes;  also  production  or  other 
specific  taxes.  (Ibid.,  Art.  X,  sec.  12). 

Statutory  Provisions 

Property  tax.  All  property  shall  be  subject  to  taxation. 
(Oklahoma  Statutes,  1910,  sec.  7302).  Real  property  shall  be 
construed  to  mean  the  land  itself  and  all  buildings,  structures, 
and  improvements  and  all  rights  and  privileges  thereto  apper- 
taining, and  all  mines,  minerals  and  quarries  on  or  under  the 
same.  (Ibid.,  sec.  7304).  Oil  and  gas  property  shall  be  listed. 
(Ibid.,  sec.  7332). 

Upon  persons  holding  more  than  640  acres  of  taxable  land 
there  is  levied  a  graduated  land  tax  in  addition  to  the  ad  valo- 
rem tax  charged  against  all  property.  The  rate  is  graduated 
from  one-fourth  percent  of  the  value  of  land  in  excess  of  640 


639]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  109 

acres  when  the  person  holds  not  to  exceed  1280  acres,  to  10 
percent  upon  the  excess  over  10,000  acres  and  not  exceeding 
25,000  acres  of  average  taxable  value.  The  average  taxable 
value  is  taken  as  twenty  dollars.  Three  hundred  twenty  acres 
shall  be  exempt  from  the  tax  regardless  of  the  value  of  the 
land.  (Ibid.,  sec.  7525).  A  similar  graduated  tax  is  levied 
upon  leaseholders.  When  a  person  holds  by  lease  more  than 
640  acres  and  not  to  exceed  1280  acres  a  tax  of  one  percent  per 
annum  is  levied  on  the  income,  rents,  and  profits  of  the  excess 
over  640  acres.  The  rate  is  increased  according  to  the  acreage 
held,  up  to  ten  percent  upon  the  income  from  the  excess  over 
5000  acres  and  not  exceeding  10,000  acres.  (Ibid.,  sec.  7526). 

Gross  output  tax.  Every  person,  firm,  association,  or  cor- 
poration engaged  in  the  mining  or  production  within  the  state 
of  asphalt  or  of  ores  bearing  lead,  zinc,  jack,  gold,  silver,  or 
copper  or  of  petroleum  or  of  other  crude  oil  or  other  mineral 
or  of  natural  gas,  shall  file  quarterly  with  the  state  auditor  a 
statement  under  oath  showing  the  gross  amount  of  mineral,  oil, 
or  gas  produced,  the  cash  value  at  the  place  of  production,  the 
amount  of  royalty  payable  thereon,  if  any,  to  whom  payable 
and  whether  it  is  claimed  that  such  royalty  is  exempt  from 
taxation  by  law;  and  shall  at  the  same  time  pay  to  the  State 
Auditor  a  tax  equal  to  one-half  of  one  percent  of  the  gross  value 
of  asphalt  and  of  ores  bearing  lead,  zinc,  jack,  gold,  silver, 
copper  produced,  less  the  royalty  interest,  and  equal  to  three 
percent  of  the  gross  value  of  production  of  oil  or  gas,  less  the 
royalty  interest.  The  owner  of  the  royalty  interest  shall  pay 
the  tax  upon  the  royalty  interest.  (Laws  of  Oklahoma,  1916, 
House  Bill  No.  1,  amending  Oklahoma  Revenue  Laws,  sec.  7464). 

The  payment  of  the  taxes  specified  shall  be  in  full  and  in 
lieu  of  all  taxes  by  the  State,  counties,  cities,  towns,  and  town- 
ships, school  districts,  and  other  municipalities  upon  any  prop- 
erty rights  attached  to  or  inherent  in  the  minerals,  upon  leases 
for  the  mining  of  asphalt,  and  ores  bearing  lead,  zinc,  jack, 
gold,  silver,  or  copper  or  for  petroleum  or  other  crude  oil  or 
other  mineral  oil  or  for  natural  gas,  upon  the  mining  rights 
and  privileges  for  the  minerals  aforesaid  belonging  or  apper- 
taining to  land,  upon  the  machinery,  appliances  and  equipment 
used  in  and  around  any  well  producing  oil  or  natural  gas,  or 
any  mine  producing  the  aforesaid  minerals  and  actually  used 
in  the  operation  of  such  well  or  mine ;  and  also  upon  the  oil, 
gas,  asphalt,  or  ores  bearing  minerals  hereinbefore  mentioned 


110  MINE  TAXATION  IN  THE  UNITED  STATES  [640 

during  the  tax  year  in  which  the  same  is  produced  and  upon 
any  investment  in  any  of  the  leases,  rights,  privileges,  minerals 
or  property  hereinbefore  mentioned;  but  any  interest  in  the 
land  other  than  that  herein  enumerated,  and  oil  in  storage, 
asphalt,  and  ores  bearing  any  of  the  minerals  named,  mined, 
produced,  and  on  hand  at  the  date  as  of  which  property  is 
assessed  for  general  and  ad  valorem  taxation  for  any  subsequent 
tax  year  shall  be  assessed  and  taxed  as  other  property  within 
the  taxing  district  in  which  such  property  is  situated  at  the 
time.  (Ibid.,  sec.  7464,  as  amended). 

The  gross  production  tax  is  levied  and  collected  for  the 
following  specific  purposes: 

(1)  For  current  expenses  of  State  Government,  two-thirds. 

(2)  For  and  in  aid  of  the  common  schools  of  the  county 
from  whence  the  oil  or  gas  and  other  mineral  is  produced,  one- 
sixth  (five  mills). 

(3)  For  and  in  aid  of  the  construction  of  permanent  roads 
or  bridges  in  the  county  from  whence  the  oil  or  gas  and  other 
mineral  is  produced,  one-sixth  (five  mills). 

License  tax.  Domestic  corporations  pay  a  license  fee  of 
50  cents  per  $1000  of  capital  stock,  and  foreign  corporations 
$1  per  $1000  capital  stock  employed  in  the  State.  This  does 
not  apply  to  companies  paying  the  gross  receipts  tax.  (Revised 
Laws,  1910,  sec.  7539). 

OREGON 

Constitutional  Provisions 

Uniformity.  There  shall  be  a  uniform  rate  of  assessment 
and  taxation.  All  property  shall  be  taxed  at  its  just  value. 
(Constitution,  Art.  IX,  sec.  1). 

Statutory  Provisions 

Property  tax.  All  real  property  and  all  personal  property 
shall  be  subject  to  assessment  and  taxation  in  equal  proportion. 
(General  Laws  of  Oreg&n,  1909,  sec.  3551).  Real  estate  includes 
the  land  itself,  improvements,  all  rights  and  privileges,  and  all 
mines,  minerals,  quarries,  fossils,  in,  under,  or  upon  the  land. 
(Ibid.,  sec.  3552).  Personalty  includes  improvements  by  per- 
sons on  lands  claimed  by  them  under  the  laws  of  the  United 
States.  (Ibid.,  sec.  3553). 

Corporation  license  fee.  Domestic  mining  companies  hav- 
ing an  output  in  excess  of  one  thousand  dollars  pay  annually  a 
fee  ranging  from  $10  on  $5000  capital  to  $200  if  the  capital 


641]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  111 

stock  exceeds  $2,000,000.    If  the  output  is  less  than  $1000,  they 
pay  $10  per  annum  as  a  license.     (Laws  of  Oregon,  1913,  chap. 

73). 

PENNSYLVANIA 

Constitutional  Provisions 

Uniformity.  All  taxes  shall  be  uniform  on  the  same  class 
of  subjects.  (Constitution,  Art.  IX,  sec.  1,  par.  153). 

Statutory  Provisions 

Property  tax.  Companies  pay  locally  a  property  tax. 
(Pennsylvania  Laws,  1844,  486). 

Anthracite  tax.  Every  ton  (2240  pounds)  of  anthracite 
mined  shall  be  subject  to  a  tax  of  two  and  one-half  percent  of 
the  value  when  prepared  for  the  market,  which  tax  shall  be 
assessed  at  the  time  when  the  coal  has  been  mined  and  is  ready 
for  shipment  or  market.1  The  officer  in  charge  of  the  mine 
shall  assess  the  product  daily  as  shipped  and  upon  the  first  day 
of  the  month  shall  report  under  oath  the  assessed  value  of  the 
shipment  for  the  preceding  month  and  a  total  for  the  year  on 
January  first.  The  officer  shall  receive  one  percent  of  the  tax 
collected  as  compensation  for  the  services  imposed  on  him.  If 
the  officer  fails  or  refuses  to  assess  the  product  as  required  by 
law,  the  tax  is  increased  by  ten  percent  and  the  officer  is  subject 
to  a  fine  of  $500  or  one  year  imprisonment  or  both.  Fifty 
percent  of  the  proceeds  of  the  tax  is  paid  to  the  fund  for  the 
State  Highways  of  the  Commonwealth,  and  fifty  percent  to  the 
cities,  boroughs,  and  townships  where  the  coal  is  mined.  (Laws 
of  Pennsylvania,  1915,  Act  331). 

Capital  stock.  Corporations  pay  an  annual  tax  of  5  mills 
on  each  dollar  of  the  actual  value  of  its  capital  stock.  (Pur- 
don's  Digest  of  Pennsylvania  Laws,  p.  6065,  sec.  18). 

Loans.  A  deduction  of  4  mills  on  every  dollar  of  the  face 
value  of  bonds  or  certificates  of  indebtedness  is  made  by  the 
treasurer  of  corporations  when  paying  interest  to  bondholders. 
This  deduction  is  to  be  paid  to  the  state  treasurer.  (Laws  of 
Pennsylvania,  1885,  P.  L.  194;Act  of  June  8,  1891,  P.  L.  229). 

JAfter  the  law  of  1915  was  enacted  the  courts  declared  the  law  of 
1913  to  be  unconstitutional.  No  taxes  have  as  yet  (1916)  been  paid 
under  the  law  of  1915  and  the  Deputy  Attorney  General  writes  (October 
20,  1916)  :  "Whether  settlements  will  be  made  under  the  Act  of  1915 
and  that  question  re-heard  I  am  not  able  to  advise  now." 


112  MINE  TAXATION  IN  THE  UNITED  STATES  [642 

RHODE   ISLAND 

Constitutional  Provisions 

Uniformity.  All  laws  should  be  made  for  the  good  of  the 
whole;  and  the  burdens  of  the  state  ought  to  be  fairly  distrib- 
uted among  the  citizens.  (Art.  I,  sec.  2). 

Assessment.  The  General  Assembly  shall,  from  time  to 
time,  provide  for  making  new  valuations  of  property  for  the 
assessment  of  taxes  in  such  manner  as  they  deem  best.  (Art. 
IV,  sec.  15). 

Statutory  Provisions 

Property  tax.  All  property  shall  be  subject  to  taxation. 
(General  Laws,  1909,  chap.  56,  sec.  1). 

All  property  shall  be  assessed  at  its  full  and  fair  cash  value. 
{I~bid.,  chap.  58,  sec.  3). 

SOUTH   CAROLINA 

Constitutional  Provisions 

Uniformity.  Taxation  shall  be  uniform  on  all  property, 
except  mines  and  mining  claims,  the  proceeds  of  which  alone 
shall  be  taxed.  (Constitution,  Art.  X,  sec.  1). 

Statutory  Provisions 

Property  tax.  All  real  and  personal  property  shall  be  tax- 
able except  as  noted.  (Code  of  South  Carolina,  1912,  Title  III, 
chap.  XIV,  sec.  287). 

All  personal  property  used  in  connection  with  mines  and 
mining  claims  and  all  land  not  actually  mined  connected  with 
mines  and  mining  claims  shall  be  assessed  for  taxation  and  taxed 
as  is  done  in  the  case  of  all  other  personal  and  real  estate.  (Ibid., 
sec.  304). 

Mining  rights.  When  the  fee  of  the  soil  in  any  tract  or  lot 
of  land  is  in  one  person,  and  the  right  to  any  minerals  therein 
or  structures  thereon  in  another,  the  proceeds  of  the  minerals 
and  the  structures  shall  be  valued  and  taxed  as  personal  prop- 
erty, to  the  owners  thereof,  respectively.  (Ibid.,  sec.  380). 

Gross  proceeds.  In  all  cases  where  land  is  actually  mined, 
such  land  shall  not  be  assessed  for  taxation  or  taxed,  but  in  lieu 
thereof,  the  gross  proceeds  alone  of  such  mines  and  mining 
claims  shall  be  assessed  and  taxed.  Such  gross  proceeds  shall 
be  determined  by  the  cash  market  value  of  the  material  mined. 
(Ibid.,  sec.  304). 


643]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  113 

Corporation  license.  Corporations  shall  pay  a  tax  of  one- 
half  mill  upon  each  dollar  of  capital  stock.  (Ibid.,  sec.  364). 

SOUTH  DAKOTA 

Constitutional  Provisions 

Uniformity.  All  taxes  shall  be  uniform  on  all  property. 
(Constitution,  Art.  XI,  sec.  2). 

Statutory  Provisions 

Property  tax.  All  real  and  personal  property  shall  be 
subject  to  taxation.  (Compiled  Laws,  1913,  sec.  2053).  Real 
property  shall  include  all  lands,  improvements,  and  all  rights 
and  privileges  thereto  belonging,  and  all  mines,  minerals  and 
quarries  in  and  under  the  same.  (Ibid.,  sec.  2054).  All  prop- 
erty shall  be  assessed  at  its  true  value  in  money.  (Ibid.,  sec. 
2085).  In  valuing  any  real  property  upon  which  there  is  a  coal 
or  other  mine,  or  stone  or  other  quarry,  the  same  shall  be  valued 
at  such  a  price  as  such  property  including  the  mine  or  quarry, 
would  sell  at  a  fair  voluntary  sale  for  cash.  (Ibid.,  sec.  2085). 

TENNESSEE 

Constitutional  Provisions 

Uniformity.  .  All  property,  real  and  personal,  shall  be  taxed 
according  to  its  value  so  that  taxes  shall  be  equal  and  uniform 
throughout  the  State.  No  one  species  of  property  shall  be  taxed 
higher  than  any  other  species  of  the  same  value.  (Constitution, 
Art.  II,  sec.  28).  The  legislature  may  tax  incomes  derived  from 
stocks  and  bonds  not  taxed  ad  valorem.  (Ibid.,  sec.  28). 

Statutory  Provisions 

Property  tax.  All  property  shall  be  assessed  at  actual  cash 
value.  (Laws  of  Tennessee,  1907,  chap.  602,  sec.  4).  All  min- 
eral interests  shall  be  taxed  as  real  estate.  (Ibid.,  sec.  5). 
Machinery  shall  be  taxed  as  personal  property.  (Ibid.,  sec.  8). 

Annual-charter  tax.  Every  domestic  corporation  and  every 
foreign  corporation  qualified  to  transact  business  in  the  state, 
shall  be  required  to  pay  annually  to  the  State  for  state  purposes 
a  tax  in  the  nature  of  an  annual-charter  fee  ranging  from  $5 
to  $150  according  to  the  amount  of  authorized  capital  stock. 
(Ibid.,  chap.  434,  as  amended  by  Laws  of  1913,  first  extra 
session,  chap.  13). 


114  MINE  TAXATION  IN  THE  UNITED  STATES  [644 

Corporation  tax.  All  corporations  shall  pay  an  ad  valorem 
tax  upon  the  full  value  of  corporate  property, — not  less  than 
the  actual  value  of  all  shares  of  stock,  together  with  the  actual 
value  of  the  bonded  indebtedness.  (Ibid.,  1907,  chap.  602,  sec. 
22).  Deductions  shall  be  made  for  property  outside  the  state. 

TEXAS 

Constitutional  Provisions 

Uniformity.  Taxation  shall  be  equal  and  uniform.  All 
property  shall  be  taxed  in  proportion  to  its  value  which  shall 
be  ascertained  as  provided  by  law.  (Constitution,  Art.  VIII,. 
sec.  1).  The  legislature  shall  have  no  power  to  release  from 
taxation.  (Ibid.,  sec.  10). 

Income  tax.  The  legislature  may  tax  incomes  of  both  natu- 
ral persons  and  corporations.  (Ibid.,  sec.  1). 

Statutory  Provisions 

Property  tax.  All  property  shall  be  subject  to  taxation  and 
valued  at  its  true  and  full  value  in  money.  (Statutes,  1911, 
Art.  7503,  7530). 

Real  property  includes  the  land  itself  and  all  buildings, 
structures,  and  improvements  thereon,  all  rights  and  privileges 
belonging  thereto,  and  all  mines,  minerals,  quarries,  and  fossils 
in  and  under  the  same.  (Ibid.,  Art.  7504). 

Taxable  personal  property  includes  royalties.  (Ibid.,  Art. 
7505). 

Property  held  under  a  lease  or  a  term  of  three  years  or 
more,  or  held  under  a  contract  for  the  purchase  thereof,  belong- 
ing to  this  State,  shall  be  considered  for  all  the  purposes  of 
taxation,  as  the  property  of  the  person  so  holding  the  same. 
(Ibid.,  Art.  7529).  In  valuing  any  real  property  in  which  there 
is  a  coal  or  other  mine,  or  stone  or  other  quarry,  the  same  shall 
be  valued  at  such  a  price  as  such  property,  including  the  mine 
or  quarry,  would  probably  sell  at  a  fair  voluntary  sale  for  cash. 
(Ibid.,  Art.  7530). 

Corporation  tax.  Individuals  and  corporations  operating 
oil  wells  shall  make  a  quarterly  report  showing  the  total  amount 
of  oil  produced  during  the  quarter  and  the  average  market  value 
thereof.  They  shall  pay  to  the  state  treasurer  an  occupation 
tax  for  the  quarter  equal  to  one-half  percent  of  the  total  amount 
of  all  oil  produced  at  the.  average  market  value.  (Ibid.,  Art. 
7383). 


645]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  115 

Franchise  tax.  Domestic  corporations  shall  pay  fifty  cents 
on  each  one  thousand  dollars  of  authorized  capital  stock,  unless 
the  amount  of  stock  issued  plus  the  surplus  and  undivided 
profits  shall  exceed  its  authorized  capital  stock;  in  that  event 
said  corporations  shall  pay  fifty  cents  on  each  thousand  dollars 
of  outstanding  stock  plus  the  surplus  and  undivided  profits. 
The  minimum  tax  shall  be  ten  dollars.  The  rate  shall  be 
twenty-five  cents  per  thousand  dollars  when  the  capital  stock 
or  the  capital  stock  and  surplus  and  profits  exceed  one  million 
dollars.  (Ibid.,  Art.  7393).  Foreign  corporations  pay  a  simi- 
lar tax  but  graduated.  (Ibid.,  Art.  7394). 

UTAH  , 

Constitutional  Provisions 

Mines.  All  mines  and  mining  claims,  containing  valuable 
mineral  deposits  after  purchase  from  the  United  States,  shall 
be  taxed  at  the  price  paid  the  United  States  therefor,  unless 
the  land  is  used  for  other  purposes.  If  used  for  other  purposes, 
it  shall  be  taxed  as  is  property  similarly  used.  Machinery  used 
in  mining  and  all  property  and  surface  improvements  having 
a  value  separate  and  independent  of  such  mines  and  the  net 
annual  proceeds  shall  be  appraised  and  taxed  by  the  State  Board 
of  Equalization.  (Constitution,  Art.  XIII,  sec.  4). 

Statutory  Provisions 

Property.  Real  estate  includes  all  mines,  minerals  and 
quarries  in  and  under  the  land  and  all  rights  and  privileges 
appertaining  thereto.  (Statutes,  1907,  sec.  2505).  Surface 
improvements  having  a  separate  value  from  the  mine  or  claim 
not  to  be  exempt  from  taxation.  (Ibid.,  sec.  2572).  Capital 
stock  and  franchises  shall  be  listed  and  taxed  where  the  prin- 
cipal office  or  place  of  business  is  located.  (Ibid.,  sec.  2530). 

Net  proceeds  tax.  All  mines  report  annually  the  net  pro- 
ceeds which  are  taxed  at  the  same  rate  as  other  property.  From 
the  gross  yield,  including  coke  made  from  coal,  or  bullion  or 
matter  made  from  ore  not  taxed,  deductions  shall  be  made  for 
the  actual  expenditures  in  mining,  transporting,  and  reducing 
the  product,  including  expenditures  for  labor,  machinery,  sup- 
plies used,  improvements  and  transportation ;  but  money  invested 
prior  to  the  period  covered  by  the  annual  report  shall  not  be 
included  nor  the  salaries  of  officers  not  actually  engaged  in  the 
state  in  the  operations.  The  balance  shall  constitute  the  net 
proceeds.  (Ibid.,  sec.  2566). 


116  MINE  TAXATION  IN  THE  UNITED  STATES  [646 

Annual  corporation  license  tax.  All  domestic  corporations 
and  all  foreign  corporations  hereafter  engaged  in  any  business 
in  this  state  shall  procure  a  certificate  from  the  Secretary  of 
State,  authorizing  such  corporation  to  engage  in  business  within 
this  state  and  each  of  the  corporations  shall  pay  to  the  Secretary 
of  State  a  corporation  license  tax  as  follows:  All  corporations 
with  an  authorized  capital  stock  of  $10,000  or  less,  $5;  with 
an  authorized  capital  stock  of  more  than  $10,000  and  not  to 
exceed  $25,000,  $10;  and  graduated  to  $250  on  an  authorized 
capital  stock  of  more  than  $4,000,000.  (Laws  of  Utah,  1915, 
chap.  42). 

VERMONT 

Constitutional  Provisions 
Nothing  specific  on  mines. 

Statutory  Provisions 

Property  tax.  Real  and  personal  property  shall  be  taxable. 
(Public  Statutes,  1906,  sec.  488). 

Property  shall  be  appraised  quadrennially  after  1910. 
(Ibid.,  sec.  525).  Forges,  furnaces,  mines,  and  quarries  where 
stone  is  quarried  shall  be  set  in  a  column  separate  from  real 
estate  and  designated  as  first-class  real  estate.  All  other  real 
estate  shall  be  designated  as  second-class  real  estate.  (Ibid., 
sec.  525).  The  interest  of  a  grantee  in  severance  from  surface 
ownership,  in  mines,  quarries,  or  the  right  of  mining  and  quar- 
rying shall  be  set  in  the  list  as  real  estate.  (Ibid.,  sec.  491). 

Exemption.  Municipalities  may  exempt  from  taxation  for 
ten  years  quarries,  mines,  and  such  equipment  as  is  necessary 
for  the  prosecution  of  the  business  and  all  capital  and  personal 
property  used  in  such  business,  if  the  amount  invested  exceeds 
one  thousand  dollars.  (Ibid.,  sec.  499). 

VIRGINIA 
Constitutional  Provisions 

Uniformity.  All  property,  except  as  provided,  shall  be 
taxed.  All  taxes  shall  be  uniform  upon  the  same  class  of  sub- 
jects. (Constitution,  Art.  XIII,  sec.  168). 

Assessing.  Property  shall  be  assessed  at  a  fair  market  value 
to  be  ascertained  as  prescribed  by  law.  Nothing  in  this  Consti- 
tution shall  prevent  the  General  Assembly,  after  the  first  day 
of  January,  1913,  from  segregating  for  the  purposes  of  taxation 
the  several  kinds  and  classes  of  property,  so  as  to  specify  and 


647]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  117 

determine  upon  what  subjects  state  taxes  and  upon  what  sub- 
jects local  taxes  may  be  levied.  (Ibid.,  sec.  169).  Real  estate 
shall  be  reassessed  every  five  years.  (Ibid.,  sec.  171).  The 
General  Assembly  shall  provide  for  the  special  and  separate 
assessment  of  all  coal  and  other  mineral  land;  but  until  such 
special  assessment  is  made,  such  land  shall  be  assessed  under 
existing  laws.  (Ibid.,  sec.  172). 

Income  tax.  The  General  Assembly  may  levy  income  taxes. 
(Ibid.,  see.  170). 

Corporation  tax.  The  State  shall  have  the  right  to  tax 
corporations.  (Ibid.,  sec.  64). 

Statutory  Provisions 

Property  tax.  All  real  estate,  except  as  exempted,  shall  be 
subject  to  an  annual  tax.  (Code  of  Virginia,  1904,  sec.  456). 
Machinery  and  fixtures  to  real  estate  in  mining  establishments 
shall  be  assessed  and  taxed  against  the  owner  thereof.  (Ibid., 
sec.  485).  In  assessing  real  estate,  the  actual  value  of  the  min- 
erals shall  be  considered ;  if  the  title  to  the  minerals  is  separate 
from  the  title  to  the  surface,  it  shall  be  assessed  and  taxed  to 
the  owner.  (Laws  of  Virginia,  1910,  sec.  437a). 

Capital-stock  tax.  A  graduated  state  franchise  tax  is  col- 
lected; the  amount  varies  from  $10  on  $25,000  capitalization  to 
$200  on  $1,000,000  and  $10  for  each  $100,000  in  excess  thereof. 
(Ibid.,  1910,  chap.  58).  This  tax  is  levied  on  domestic  corpora- 
tions only. 

Registration  fee.  An  annual  tax  or  registration  fee  is  paid 
by  all  corporations,  foreign  and  domestic.  The  tax  is  graduated 
and  based  on  total  authorized  capital  stock.  It  ranges  from 
$5,  on  a  capitalization  of  $15,000,  or  less,  to  $25,  when  in  excess 
of  $300,000.  (Ibid.,  1908,  chap.  227). 

WASHINGTON 

Constitutional  Provisions 

Uniformity.  All  property  shall  be  taxed  in  proportion  to 
its  value.  (Constitution,  Art.  VII,  sec.  1).  The  legislature 
shall  provide  by  law  a  uniform  and  equal  rate  of  assessment 
and  taxation  on  all  property  according  to  its  value  in  money. 
(Ibid.,  sec.  2).  The  legislature  may  provide  for  the  taxation 
of  corporations.  (Ibid.,  sec.  3). 

Exemptions.  The  legislature  may  by  general  law  provide 
for  the  exemption  of  property  other  than  that  listed  in  the 
Constitution.  (Ibid.,  sec.  2). 


118  MINE  TAXATION  IN  THE  UNITED  STATES  [648 

Statutory  Provisions 

Property  tax.  All  property  shall  be  assessed  at  its  true 
value  in  money.  In  valuing  any  real  property  in  which  there 
is  a  coal  or  other  mine,  or  stone  or  other  quarry,  the  same  shall 
be  valued  at  such  a  price  as  such  property  including  the  mine 
or  quarry  would  sell  at  a  fair,  voluntary  sale  for  cash.  Taxable 
leasehold  estate  shall  be  valued  at  such  a  price  as  it  would  sell 
at  a  fair,  voluntary  sale  for  cash.  (Code  of  Washington,  sec. 
9112).  All  property  shall  be  assessed  at  not  to  exceed  fifty 
percent  of  its  true  and  fair  value.  (Laws  of  Washington,  1913, 
chap.  140). 

License.  An  annual  license  fee  of  $15  is  levied  upon  com- 
panies having  capital  stock.  (Code,  sec.  3714). 

WEST  VIRGINIA 

Constitutional  Provisions 

Uniformity.  Taxation  shall  be  equal  and  uniform  through- 
out the  state,  and  all  property,  both  real  and  personal,  shall  be 
taxed  in  proportion  to  its  value,  to  be  ascertained  as  directed 
by  law.  The  legislature  shall  have  power  to  tax,  by  uniform 
and  equal  laws,  all  privileges  and  franchises  of  persons  and 
corporations.  (Constitution,  Art.  X,  sec.  1). 

Statutory  Provisions 

Property  tax.  Personal  property  includes  the  value  of 
mine  or  manufactured  products.  (Code  of  West  Virginia,  1906, 
sec,  794). 

Leaseholds.  Mineral  rights  owned  separately  from  the 
surface  shall  be  assessed  and  taxed  to  their  owner.  (Ibid.,  sec. 
923).  As  the  minerals  are  exhausted,  if  the  actual  decrease  in 
value  is  in  excess  of  one  hundred  dollars,  the  assessor  shall  make 
such  reduction  in  value  as  shall  be  proper  and  if  development 
increases  the  value  more  than  one  hundred  dollars,  the  assessor 
shall  increase  the  assessment  to  the  actual  value  thereof.  (Ibid., 
sec.  923). 

Capital-stock  tax.  Domestic  corporations  pay,  in  addition 
to  the  general  property  tax,  an  annual  state  license  based  on 
authorized  capital  stock.  Those  corporations  having  the  prin- 
cipal place  of  business  and  chief  works  in  the  State  pay  a  tax 
varying  from  $10,  when  the  authorized  capital  stock  is  $5000  or 
less,  to  $170,  when  the  authorized  capital  stock  is  $1,000,000, 
with  $60  additional  tax  for  each  $1,000,000  additional  capital 


649]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  119 

stock.  (Ibid.,  1909,  chap.  68).  When  the  principal  place  of 
business  or  chief  works  is  located  without  the  State,  the  tax 
varies  from  $15  on  a  capitalization  of  $10,000  or  less,  to  $675 
when  the  authorized  capital  stock  is  more  than  $4,000,000,  with 
$50  additional  tax  on  each  $1,000,000  authorized  capital  stock 
in  excess  of  $4,000,000.  (Code  of  West  Virginia,  sec.  1050). 
Foreign  corporations  pay  a  tax  based  on  the  proportion  of 
the  capital  stock  represented  by  its  property  owned  or  used  in 
the  State,  the  minimum  tax  being  $100.  The  rates  are  gradu- 
ated. (Ibid.,  sec.  1052). 

WISCONSIN 
Constitutional  Provisions 

Uniformity.  Taxation  shall  be  uniform.  (Constitution, 
Art.  VIII,  sec.  1). 

Income  tax.  Taxes  may  be  imposed  on  incomes,  which 
taxes  may  be  graduated,  and  progressive.  (Ibid.,  Art.  VIII, 
sec.  1). 

Statutory  Provisions 

Property  tax.  All  property,  unless  specially  provided  for, 
shall  be  assessed  locally.  (Statutes  of  Wisconsin,  1911,  sec. 
1034).  Real  estate  shall  include  all  lands,  improvements,  rights, 
•etc.  (Ibid.,  sec.  1035).  Real  property  shall  be  valued  by  the 
assessor  from  actual  view  or  from  the  best  information  that  the 
assessor  can  practically  obtain,  at  the  full  value  which  could 
ordinarily  be  obtained  therefor  at  private  sale.  (Ibid.,  sec. 
1052).  Mineral  rights  and  reservations  held  by  other  than  the 
owner  of  the  surface  shall  be  taxable.  (Ibid.,  sec.  1042J).  The 
assessor  in  determining  the  value  of  land  shall  consider 
minerals,  quarries,  and  other  valuable  deposits  known  to  be 
available  therein  and  their  value.  "But  the  fact  that  the  extent 
and  value  of  minerals  and  other  valuable  deposits  are  unascer- 
tained shall  not  preclude  the  assessor  from  affixing  to  such 
parcel  of  land,  the  value  that  would  ordinarily  be  obtained 
therefor  at  private  sale."  (Ibid.,  sec.  1052). 

Lead  and  zinc  mines  and  lands.  "For  purposes  of  assess- 
ment and  taxation  lands  containing  deposits  of  lead  or  zinc 
shall  be  valued  in  the  following  manner,  to  wit:  The  value 
of  each  parcel  of  such  land,  exclusive  of  its  mineral  content, 
shall  first  be  determined,  and  to  this  there  shall  be  added,  in 
lieu  of  the  value  of  such  mineral  content,  one-fifth  of  the  gross 
amount  of  sales  of  any  ore,  mineral  or  deposit  extracted  from 


120  MINE  TAXATION  IN  THE  UNITED  STATES  [650 

such  land  at  any  time  and  sold  during  the  preceding  calendar 
year.  Nothing  herein  shall  be  construed  to  exempt  from  taxa- 
tion the  buildings,  machinery,  mills,  equipment,  stores,  supplies 
or  other  personal  property  of  any  person,  copartnership,  corpo- 
ration, association  or  company  engaged  in  mining  or  extracting 
such  deposits."  (Laws  of  Wisconsin,  1915,  chap.  388,  sec.  1. 
To  be  numbered  sec.  1053  of  the  Statutes).  "Every  owner  of 
such  land,  and  every  person,  copartnership,  corporation,  asso- 
ciation or  company  engaged  in  mining  or  extracting  such  depos- 
its shall  furnish  to  the  assessor  of  incomes  of  the  district  a 
verified  statement  or  return  giving  a  correct  description  of  each 
such  parcel  of  land,  the  name  of  the  owner  thereof,  the  amount 
of  sales  or  purchases  of  all  ore,  minerals  and  deposits  mined 
or  extracted  therefrom  at  any  time  and  sold  during  the  preced- 
ing calendar  year.  In  the  discretion  of  the  assessor  of  incomes, 
similar  reports  may  be  required  from  each  person,  copartner- 
ship, association,  corporation  or  company  engaged  in  purchas- 
ing such  ore,  minerals  or  deposits."  (Ibid.,  sec.  2).  "The 
assessor  of  incomes  shall  determine  the  gross  amount  of  sales 
of  such  ore,  mineral,  or  deposits  from  each  parcel  of  land  and 
shall  certify  the  same  to  the  assessor  of  each  district.  On  the 
basis  of  such  sales  the  valuation  of  each  such  parcel  of  land 
shall  be  computed  by  the  assessor  and  shall  be  taxed  as  other 
property  in  the  same  district  is  taxed."  (Ibid.,  sec.  3). 

Income  tax.  The  State  income  tax  is  levied  upon  corpora- 
tions and  upon  individuals.  (Laws  of  Wisconsin,  1911,  chap. 
658.  Ibid.,  1913,  chap.  27,  443,  487,  554,  615,  720.  See  also 
Wisconsin  Income  Tax  Law,  2d  Ed.,  Wis.  Tax  Commission, 
Madison,  1913). 

The  rate  upon  the  income  of  corporations  is  2  percent  on 
the  first  $1000  of  taxable  income,  and  there  is  a  graduation  of 
the  rate  up  to  6  percent  on  all  taxable  income  in  excess  of 
$7000.  (Laws  of  Wisconsin,  1913,  chap.  720). 

The  rate  upon  the  taxable  incomes  of  individuals  is  gradu- 
ated from  1  percent  on  the  first  $1000  to  6  percent  on  the  excess 
over  $12,000. 

The  term  income  includes  "all  royalties  from  mines  or  the 
possession  or  use  of  franchises  or  legalized  privileges  of  any 
kind".  (Ibid.,  sec.  1087m-2). 

In  determining  taxable  income,  rentals,  royalties,  and  gains- 
or  profits  from  the  operation  of  any  mine,  or  quarry  shall  fol- 
low the  situs  of  the  property  from  which  derived.  (Ibid.,  chap.. 
720,  sec.  1087m-2). 


651]  CONSTITUTIONAL  AND  STATUTORY  ENACTMENTS  121 

Deductions  allowed  a  corporation  include  "ordinary  and 
necessary  expenses  actually  paid  within  the  year  out  of  income 
in  the  maintenance  and  operation  of  its  business  and  property, 
including  a  reasonable  allowance  for  depreciation  by  use,  wear, 
and  tear  of  property  from  wrhich  the  income  is  derived  and  in 
the  case  of  mines  and  quarries  an  allowance  for  depletion  of 
ores  and  other  natural  deposits  on  the  basis  of  their  actual  origi- 
nal cost  in  cash  or  the  equivalent  in  cash."  (Ibid.,  chap.  720, 
sec.  1087m-3). 

WYOMING 

Constitutional  Provisions 

Uniformity.  All  taxation  shall  be  equal  and  uniform. 
(Constitution,  Art.  I,  sec.  28).  All  property,  except  as  pro- 
vided, shall  be  uniformly  assessed  for  taxation  and  the  legis- 
lature shall  prescribe  such  regulations  as  shall  secure  a  just 
valuation  for  taxation  of  all  property.  (Ibid.,  Art.  XV,  sec. 

11). 

Exemptions.  The  legislature  may  by  general  laws  provide 
for  the  exemption  of  property  other  than  that  listed  in  the 
Constitution.  (Ibid.,  Art.  XV,  sec.  12). 

Mines.  All  mines  and  mining  claims  shall  be  taxed  on 
surface  improvements  and,  in  lieu  of  taxes  on  land,  also  on  the 
gross  product,  provided  that  the  product  of  all  mines  shall  be 
taxed  in  proportion  to  the  value  thereof.  (Ibid.,  Art.  XV,  sec. 
3).  All  coal  lands  in  the  State  from  which  coal  is  not  being 
mined  shall  be  listed  for  assessment,  valued  for  taxation  and 
assessed  according  to  value.  (Ibid.,  Art.  XV,  sec.  2). 

Statutory  Provisions 

Property  tax.  All  property  not  exempted  is  subject  to 
taxation  in  manner  directed.  (Compiled  Statutes,  1910,  sec. 
2324). 

Gross  product  tax.  In  addition  to  the  taxes  on  surface 
improvements  and  in  lieu  of  taxes  upon  the  land  on  which  the 
claims  are  being  worked,  there  shall  be  levied  and  collected  a 
tax  on  gross  product  of  all  mines,  oil-wells,  and  quarries.  (Laws 
of  Wyoming,  1909,  sec.  2449).  The  Commissioner  of  Taxation 
shall  appraise  the  value  of  the  gross  products  of  all  mines,  and 
submit  such  appraisements  to  the  State  Board  of  Equalization. 
(Ibid.,  chap.  66). 


CHAPTER  V 

t 

METHODS  OP  TAXING  MINES  AND  MINERAL  LANDS  IN  THE  STATES 

SUMMARY 

An  examination  of  the  laws  of  the  various  states  shows  that 
taxes  have  been  levied  on  mining  property,  as  follows : 

A.  A  general  property  tax. 

B.  A  tax  on  the  gross  output  or  gross  earnings,  in  addition 
to  a  property  tax  on  improvements  and,  in  some  states, 
on  land. 

C.  A  tax  on  net  earnings,  in  addition  to  a  property  tax 
on  improvements  and,  in  some  states,  on  land. 

D.  A  tax  on  some  percentage  of  the  gross  and  of  the  net 
earnings  in  addition  to  a  tax  on  improvements  and, 
in  some  states,  on  land. 

In  addition  to  one  of  the  foregoing,  there  may  be : 

E.  A  corporation  tax,  including  a  license  or  business  tax. 

F.  A  state  income  tax. 

Several  states  have  previously  used  a  tax  which  is  not  at 
present  employed  anywhere  in  the  United  States,  namely, 

G.  A  tonnage  tax. 

GENERAL  PROPERTY  TAX 

With  the  exception  of  South  Carolina  in  the  South;  Okla- 
homa in  the  Middle  West;  and  Colorado,  Wyoming,  Montana, 
Idaho,  Utah,  Nevada,  and  New  Mexico  in  the  West,  all  of  the 
states  now  levy  the  general  property  tax  on  mining  property 
the  same  as  on  other  property.1 

As  applied  to  mines  the  general  property  tax  possesses 
the  same  advantages  and  disadvantages  that  prevail  in  its  appli- 
cation to  property  in  general,  and  in  addition  it  may  be  said 
that  the  task  of  making  a  fair  appraisal  is  more  difficult  for 

JIn  addition  to  the  general  property  tax  Pennsylvania  has  levied  a 
tax  upon  anthracite  mines.  Oklahoma  does  not  tax  coal  mines  upon  the 
gross  proceeds  but  upon  an '  ad  valorem  basis,  while  Wisconsin  taxes 
all  mines  upon  an  ad  valorem  basis  except  those  producing  lead  and  zinc 
which  are  valued  and  assessed  at  one-fifth  of  the  gross  proceeds  for 
the  preceding  year. 

122 


653]  METHODS  OF  STATE  TAXATION  123 

mines  than  for  most  other  types  of  property.  This  is  due  to 
the  fact  that  a  technical  knowledge  of  mines  and  mining  opera- 
tions is  necessary  on  the  part  of  the  appraiser,  if  a  proper 
valuation  is  to  be  made.2 

The  constitutions  of  most  of  the  states  have  prescribed 
such  limitations  regarding  taxation  that  the  property  tax  as 
now  employed  is  practically  the  only  method  which  can  be  used 
in  taxing  mines,  and  it  seems  that  the  best  plan  of  procedure 
in  such  states  is  to  enact  laws  providing  for  the  assessment  of 
all  property  at  full  cash  value,  with  competently  trained  and 
experienced  mine  appraisers  to  determine  the  value  of  mining 
property. 

At  the  present  time,  with  the  exception  of  Minnesota,  Michi- 
gan,8 Wisconsin,  Arizona,  Virginia,  West  Virginia,  and  Ohio, 
all  the  important  mining  states  assessing  mines  under  the 
general  property  tax,  rely  upon  the  work  of  local  assessors.  In 
those  states  in  which  the  appraisal  of  mining  property  has  been 
centralized  or  supervised  by  state  officers  there  has  been  secured 
apparently  a  valuation  of  property  which  is  generally  recognized 
as  being  more  equitable  than  is  possible  under  the  system  of 
local  and  unsupervised  assessment. 

In  1913  the  states  taxing  mines  under  the  general  property 
tax  produced  82.66  percent  of  the  total  output  of  the  mineral 
industry.  In  1915,  Arizona  joined  the  list  of  state  taxing  mines 
under  the  general  property  tax  and  if  Arizona  had  been  included 
in  the  list  of  general  property  tax  states  in  1913,  the  percentage 
would  have  been  increased  from  82.66  to  S5.56.5  From  these 
data  it  is  apparent  that,  at  the  present  time  at  least,  one  of  the 
greatest  public  problems  to  be  solved  in  the  mining  states  is 
that  of  valuation  of  mines,  for  the  purpose  of  taxation  under 
the  general  property  tax. 

A  graduated  tax  may  be  levied  upon  land  in  order  to  dis- 
courage the  holding  of  large  estates  or  large  tracts  for  specu- 
lative purposes.  The  graduated  land  tax  in  Oklahoma5*  has 

2The  appraisal  of  mines  is  considered  in  Chapter  VII. 

3For  iron  mines  only. 

5If  the  value  of  the  coal  output  of  Colorado,  taxed  under  the  general 
property  tax,  is  included  with  the  value  of  the  output  of  the  general 
property  tax  states,  the  percentage  becomes  86.50. 

^Oklahoma  Statutes,  1910,  sec.  7325,  7326. 

8bThe  mining  law  of  Mexico  which  took  effect  July  i,  1916,  calls  for  a 
general  increase  in  taxation  on  all  large  properties  with  a  corresponding 


124  MINE  TAXATION  IN  THE  UNITED  STATES  [654 

been  noted  in  Chapter  IV.  In  Mexico,5b  in  Canada,  and  in  Aus- 
tralia50 this  method  of  taxation  is  employed  extensively. 

GROSS  OUTPUT  AND  PROPERTY  TAX 

In  several  states  the  gross  value  of  the  entire  output  of 
mines  is  entered  upon  the  tax  roll  of  the  district  and  the  mine 
is  taxed  on  the  value  of  its  output  at  the  same  rate  as  is  applied 
to  property  in  general.  This  is  in  effect  a  declaration  that  the 
value  of  a  mine  is  equivalent  to  the  value  of  the  product  for 
one  year.  In  addition,  mines  pay  a  property  tax  upon  improve- 
ments. This  plan  is  followed  by  Wyoming  and  South  Carolina 
for  all  mines  and,  in  a  modified  way,  by  Wisconsin  and  Okla- 
homa for  certain  types  of  mines. 

Wyoming.  A  tax  is  levied  on  improvements  upon  mines 
in  Wyoming6  and,  in  lieu  of  taxes  upon  the  land,  while  the 
property  is  being  worked,  there  is  also  a  tax  upon  the  gross 
product.  This  applies  to  all  mines,  oil-wells,  and  quarries.7 

South  Carolina.  The  Constitution  of  South  Carolina  pro- 
vides that  only  the  proceeds  of  mines  shall  be  taxed.8  However, 
the  statutes  provide  for  the  taxation  of  the  personal  property 
used  in  connection  with  mines  and  mining  claims.9  When  land 
is  actually  mined  it  is  exempt  from  taxation10  and  the  proceeds 
are  assessed  at  the  cash  market  value  and  taxed  at  the  same  rate 
as  other  property. 

Wisconsin.  The  lead  and  zinc  mines  and  lands  are  valued 
for  assessment  at  one-fifth  of  the  gross  amount  of  sales  of  ore 

benefit  for  the  small  operators,  the  announced  intention  of  the  government 
being  to  break  up  holdings  that  are  conserved  more  for  speculative  than 
for  development  purposes.  The  unit  of  taxation  is  the  pertenencia,  or 
mining  claim,  of  one  hectare  or  2]/2  acres.  The  assessment  on  gold  and 
silver  mines  is  $6  yearly  on  from  i  to  10  claims;  1 1  to  So  claims,  $12  each 
yearly;  from  51  to  100  claims,  $18  per  claim  yearly;  on  101  claims  and 
upward,  $24  each  yearly. 

5cSleeman,  H.  R.  Taxation  in  Australia.  Mining  Magazine,  1915, 
XIII,  92-96. 

6Lazus  of  Wyoming,  1909,  sec.  2449. 

The  assessment  of  all  mines  is  based  upon  the  gross  output,  allowance 
being  made  for  operating  expenses  and  also  the  valuation  of  the  output 
at  the  mine,  as  regards  distance  from  market,  or  railroads,  quality  of  coal, 
etc.  The  State  is  districted  and  the  same  valuation  placed  upon  the 
product  of  each  district  separately."  Correspondence. 

Constitutions,  Art.  X,  sec.  I. 

gCode  of  South  Carolina,  1912,  Title  III,  chap.  XIV,  sec.  304. 

10Ibid.t  par.  304. 


€55]  METHODS  OP  STATE  TAXATION  125 

extracted  from  the  mines  or  lands  during  the  preceding  calendar 
year.  On  this  valuation  the  property  is  taxed  at  the  same  rate 
as  other  property  in  the  district.11  This  valuation  covers  only 
the  mineral  content  of  the  land  and  all  buildings  and  surface 
improvements  are  taxed  ad  valorem. 

Oklahoma.  A  variation  from  the  preceding  method  has 
been  used  by  Oklahoma.  In  this  State  in  addition  to  the  ad 
valorem  tax  on  property,  all  mining  and  oil  companies  pay  a 
tax  on  the  actual  cash  value  of  the  output,  except  coal  mines 
which  are  taxed  as  other  property.12 

This  is  actually  a  gross  earnings  or  gross  output  tax,  the 
South  Carolina  and  Wyoming  method  being  practically  a  general 
property  tax  levied  upon  the  value  of  the  mine  which  is  taken 
arbitrarily  as  the  value  of  one  year's  output.  The  rate  of  the 
tax  in  Oklahoma  is  the  same  from  year  to  year  while  in  South 
Carolina  and  Wyoming  the  rate  paid  by  mines  depends  on  the 
levy  upon  all  property. 

Pennsylvania.  In  1913  the  Pennsylvania  legislature  enacted 
a  law  providing  for  a  tax  at  the  rate  of  two  and  one-half  per 
cent  of  the  value  at  the  mine  of  every  ton  of  anthracite  when 
prepared  for  market.13  This  follows  the  Oklahoma  method  in 
that  the  rate  is  fixed.  However,  the  Pennsylvania  tax  is  in 
addition  to  the  property  taxes  which  have  been  levied  previously. 
The  so-called  "anthracite  tax"  is  a  state  tax,  but  one-half  of 
the  proceeds  of  the  tax  is  returned  to  the  county. 

A  tax  on  output  at  a  uniform  rate  throughout  the  State 
reduces  mining  practically  to  a  leasing  system.  Title  to  the 
mine  rests  in  the  operator  instead  of  the  State  as  may  be  the 
case  in  the  leasing  system.  In  both  instances  the  State  receives 
a  percentage  of  the  value  of  the  output. 

The  general  objection  made  to  this  method  of  taxation  is 
that  usually  no  discrimination  is  made  between  mines  produc- 
ing at  a  high  cost  and  those  operating  at  low  costs.14 

NET  EARNINGS  AND  PROPERTY  TAX 

Several  of  the  Rocky  Mountain  states  employ  a  tax  upon 

llLaws  of  Wisconsin,  1915,  chap.  388. 

12Laws  of  Oklahoma,  1916,  House  Bill  No.  i. 

l3Laws  of  Pennsylvania,  1913,  Act  374-  Amended  by  Laws  of  1915, 
chap.  331.  The  law  of  1913  was  declared  unconstitutional  in  1915.  See 
Chapter  IV  for  the  anthracite  tax  law  of  1915. 

l*Infra,  chapter  VI. 


126  MINE  TAXATION  IN  THE  UNITED  STATES  [656 

both  the  net  earnings  and  the  improvements  of  productive  mines. 
The  net  earnings  tax  was  first  used  in  order  to  encourage  the 
development  of  mining  property.  It  exempted  unprofitable 
mines  and  attempted  to  place  the  tax  burden  according  to  ability. 
Instead  of  levying  upon  the  net  earnings  of  mines  at  a  fixed  or 
a  graduated  rate,  all  of  the  states  now  using  this  method  of  tax- 
ation tax  net  earnings  at  the  same  rate  as  other  property,  thus 
practically  appraising  each  mine  at  its  net  earnings  for  one 
year. 

The  great  difficulty  in  the  use  of  this  system  is  in  the 
determination  of  the  net  earnings.  The  statutes  of  most  of  the 
states  employing  this  method  of  taxation  specify  what  deduc- 
tions may  be  made  from  gross  earnings  in  order  to  determine 
the  net. 

This  system  is  now  used  in  Idaho,  Montana,  Nevada,  New 
Mexico,  and  Utah.  Colorado  uses  a  modified  form  of  the  system. 

Idaho.  Idaho  taxes  all  mining  claims  purchased  from  the 
United  States  at  the  price  paid  the  United  States  therefor, 
unless  the  surface,  or  some  part  of  it,  is  used  for  purposes  other 
than  mining,  in  which  event  the  land  is  taxed  as  is  other  land 
similarly  used.15  All  machinery  and  improvements  on  mines 
and  mining  claims  are  taxed  as  is  other  property.18  In  addition 
to  these  property  taxes,  all  mines  pay  a  tax  upon  net  profits. 
To  determine  the  base  for  the  net  profits  tax,  deductions  are 
made  from  the  gross  receipts  as  follows : 

The  actual  expenditure  for  mining  operations,  for  milling, 
concentrating,  or  reducing  the  ore,  for  transportation  of  the 
ore  to  the  treatment  plant,  and  for  repairs,  and  improvements 
necessary  to  the  plant  used  in  all  these  operations.  No  deduc- 
tions are  allowed  for  the  money  invested  in  the  mine,  nor  for 
the  salaries  of  officers  not  immediately  and  consecutively 
employed  in  the  working  or  management  of  the  mine.17 

Montana.  Similarly,  Montana  taxes  mining  claims,18 
improvements19  and  the  net  proceeds.20 

Nevada.  Nevada  taxes  surface  improvements,  net  proceeds, 
and  patented  mining  claims  on  which  less  than  one  hundred 

™Code  of  Idaho,  sec.  1863. 

™Ibid.,  sec.  1863. 

*7Laws  of  Idaho,  1909,  sec.  1864. 

"Const,  Art.  XIII,  sec.  3. 

19Revised  Code  of  Montana,  sec.  2570. 

MIbid.,  sec.  2563  to  2571. 


657]  METHODS  OF  STATE  TAXATION  127 

dollars'  worth  of  work  has  been  done  during  the  year,  such  a 
claim  being  assessed  at  five  hundred  dollars.  The  same  rate 
is  applied  to  net  proceeds  as  to  property  in  general.21 

New  Mexico.  Mines  and  mining  claims  are  taxed  both  upon 
surface  improvements  and  the  net  product.22 

Utah.  Utah  appraises  mining  claims  at  the  price  paid  for 
them  to  the  government.  Taxes  are  levied  upon  patented 
claims,  all  property  and  surface  improvements,23  and  the  net 
proceeds  at  the  same  rate  applied  to  other  property.24 

GROSS  AND  NET  EARNINGS  TAX  WITH   THE  GENERAL  PROPERTY  TAX 

The  method  of  taxing  a  mine  upon  the  gross  earnings  does 
not  discriminate  between  profitable  and  unprofitable  mines,  nor 
between  developing  mines  with  a  small  output  produced  at  a 
loss  and  developed  properties.  No  distinction  is  made  between 
two  mines  of  equal  output  but  operating  under  different  condi- 
tions. On  the  other  hand  the  system  of  taxing  mines  upon  net 
earnings  does  not  reach  the  unprofitable  mine  which  may  have 
some  cash  value  and  under  the  system  of  valuing  mines  at  their 
net  earnings  for  one  year  the  rate  applied  to  other  property 
might  not  take  from  mines  a  fair  share  of  the  public  revenue 
required. 

By  a  combination  of  some  percentage  of  the  gross  earnings 
with  some  percentage  of  the  net  earnings  it  has  been  thought 
that  greater  justice  may  be  secured.  This  plan  was  used  in 
1913  and  1914  by  Arizona  and  in  a  modified  way  is  employed  in 
Colorado. 

Colorado.  The  law  of  Colorado  divides  mining  property, 
except  mines  of  coal,  iron,  asphaltum  and  quarries,  into  pro- 
ducing and  non-producing.  Mines  having  a  gross  annual  output 
of  less  than  five  thousand  dollars  are  classed  as  non-producing 
and  all  others  are  producing.25  Producing  metal  mines  are 
taxed  upon  a  sum  equal  to  one-fourth  the  gross  proceeds  or  all 
the  net  proceeds  as  defined  in  the  law  in  case  the  net  exceeds 
one-fourth  of  the  gross.26  The  net  proceeds  are  determined  by 
deducting  from  the  gross  value  of  the  product,  the  actual  cost 

2lLaws  of  Nevada,  1913,  chap.  33  and  134. 
22New  Mexico  Statutes,  chap.  CVII,  sec.  i. 

28Conipiled  Laws,  sec.  2504  and  2572,  as  amended  by  Laws  of  1909, 
chap.  63.     ., 

2*Revised  Statutes,  1907,  sec.  2566  to  2569. 
-^Colorado  Revised  Statutes,  1908,  sec.  5618. 
-*Laws  of  Colorado,  191 5,  chap.  138. 


128  MINE  TAXATION  IN  THE  UNITED  STATES  [658 

of  mining,  of  transporting  the  product  to  the  place  of  reduction 
or  sale,  and  the  actual  cost  of  treatment,  reduction  or  sale. 
Salaries  of  officers  not  actually  and  consecutively  engaged  may 
not  be  included.27  The  surface  improvements  of  all  mines  are 
taxable  as  is  other  property.28  Producing  mines  of  coal,  iron, 
asphaltum  and  quarries  are  assessed  in  the  same  manner  as  other 
property.29 

Arizona.  In  1913  Arizona  adopted  a  new  plan  for  apprais- 
ing mines  under  the  general  property  tax.  This  plan  was  void 
after  June  30,  1915,  and  as  the  legislature  of  1915  failed  to  pro- 
vide any  special  laws  for  the  taxation  of  the  mines,  the  mines 
hereafter  will  be  taxed  under  the  laws  applying  to  property  in 
general.  While  the  act  of  191330  specified  that  this  method  of 
taxation,  adopted  only  for  the  time,  was  not  to  be  considered  as 
a  method  of  taxing  proceeds,  yet  the  law  in  its  wording,  and  in 
its  operation  apparently,  was  in  no  important  detail  different 
from  the  taxes  on  proceeds  employed  by  the  other  states.  All 
mines  were  taxed  upon  improvements.  Mines  were  divided  into 
two  classes, — producing  and  non-producing.  A  producing  mine 
was  defined  by  the  law  as  one  which  yielded  net  proceeds  over 
and  above  the  expenses  enumerated  in  the  law.31  All  other 
mines  were  classed  as  non-producing  and  were  taxed  as  other 
real  estate.  In  addition  to  the  taxes  on  improvements,  pro- 
ducing mines  paid  a  tax,  at  the  same  rate  as  property  in  general, 
upon  the  value  of  the  mine  which  value  was  fixed  arbitrarily 
by  the  law  at  four  times  the  net  proceeds  plus  one-eighth  of  the 
gross  proceeds.32  The  net  proceeds  were  determined  by  deduct- 
ing from  the  gross  the  actual  expenses  of  operation  and  treat- 
ment including  charges  for  repairs  and  betterment,  and  for 
transportation.  It  was  specified  that  such  expenses  should  not 
include  money  invested  in  the  purchase  price  of  the  mine,  in 
real  estate,  or  in  the  construction  of  new  mills  or  reduction 
works,  nor  the  salaries  or  any  portion  of  them  of  any  persons 
not  actually  and  consecutively  engaged  in  working  or  managing 
the  mine.38 

"Ibid.,  chap.  138. 

^Revised  Statutes,  1908,  sec.  5621. 

2»Ibid.,  sec.  5625. 

^Revised  Statutes,  1913,  sec.  4994. 

«/&«/.,  sec.  4980. 

*2Ibid.,  sec.  4982. 

*albid.,  sec.  4982. 


659]  METHODS  OP  STATE  TAXATION  129 

There  was  great  dissatisfaction  on  the  part  of  many  of  the 
tax  payers  of  Arizona  during  the  time  this  law  was  in  force. 

TONNAGE  TAX 

Mines  may  be  taxed  upon  the  tonnage  basis,  that  is,  there 
may  be  a  fixed  or  graduated  tax  upon  every  ton  of  mineral 
product  mined.  When  there  is  a  flat  rate  there  is  no  distinc- 
tion in  regard  to  the  quantity,  market  price,  or  net  value  of 
the  tonnage  produced. 

The  tonnage  tax  was  not  employed  by  any  state  in  1915.3* 
A  tonnage  tax  was  levied  in  Michigan  from  1853  to  1891.  The 
rate  applied  was  fixed  by  the  legislature  and  was  changed  from 
time  to  time  as  the  finances  of  the  State  required  and  as  the 
physical  condition  of  the  mines  and  the  financial  condition  of 
the  mining  industry  warranted.  The  tax  was  primarily  a  state 
tax  and  no  attempt  was  made  at  graduation.  That  portion  of 
the  law  which  discriminated  between  ore  smelted  in  the  State 
and  that  shipped  out  of  the  State  for  treatment  was  declared 
unconstitutional  in  1875,  as  being  in  restraint  of  interstate 
commerce.85  Since  the  law  has  been  repealed,  there  has  been 
almost  continually  a  demand  for  the  enactment  of  a  tonnage  tax 
law.  The  State  Constitution  permits  specific  taxes  but  although 
the  representatives  of  the  mining  districts  constitute  a  minority 
of  the  State  Legislature,  tonnage  tax  bills  have  failed  of  enact- 
ment. In  1914  a  movement  was  started  to  force  legislative 
action  by  the  "initiative"  but  when  the  facts  concerning  mine 
taxation  in  Michigan  became  generally  known  in  the  agricultural 
districts  of  the  State,  the  movement  lost  force  and  in  1915  there 
was  practically  no  support  in  the  State  Legislature  for  the  ton- 
nage tax  measures. 

In  Minnesota  a  tonnage  tax  was  employed  from  1881  to 
1897.  In  1896  the  law  was  declared  unconstitutional  and  it  was 
repealed  by  the  Legislature  in  1897.  There  was  subsequently 
an  effort  to  restore  a  tonnage  tax  system  as  the  appraisal  of 
mines  by  the  local  assessors  was  impractical.  Since  the  appraisal 
of  mines  has  been  made  under  the  supervision  of  the  Tax  Com- 

34Florida  collects  a  graduated  license  tax  from  phosphate  plants. 
The  graduation  is  upon  the  basis  of  tonnage  as  follows:  Plants  of 
not  more  than  20  tons  daily  capacity,  $10  tax;  20  to  30  tons,  $15  tax; 
35  to  50  tons,  $25  tax ;  50  to  65  tons,  $40  tax ;  more  than  65  tons  capacity, 
$75  tax.  Laws  of  Florida,  chap.  5597,  sec.  8. 

35Jackson  Mining  Co.  v.  Auditor  General,  32  Mich.  488,  (1875). 


130  MINE  TAXATION  IN  THE  UNITED  STATES  [660 

mission  there  has  been  little  sentiment  in  favor  of  a  tonnage 
tax.  It  is  recognized  generally  that  in  order  to  secure  justice 
in  Minnesota  a  tonnage  tax  should  be  graduated.  In  order 
to  secure  facts  upon  which  such  graduation  might  be  based 
and  then  to  apply  this  graduated  rate  would  require  as  much 
labor  and  skill  in  appraisal  as  the  system  now  in  use. 

Both  Maryland  and  Pennsylvania  formerly  employed  a 
tonnage  tax  on  mineral  products  which  tax  was  collected  through 
the  railroad  carriers.  The  Pennsylvania  Act  of  1864  levying  a 
tax  of  two  cents  on  the  product  of  mines,  quarries,  and  clay- 
beds  was  declared  unconstitutional  in  1872.36  The  Maryland 
law  was  held  unconstitutional  in  1874.37 

In  1873  a  special  road  tax  was  levied  by  townships  in  Penn- 
sylvania at  the  rate  of  one  and  one-half  cents  per  ton  of  ore 
hauled  by  teams.38  The  Pennsylvania  franchise  tax  upon  corpor- 
ations was  a  tonnage  tax  and  was  in  force  from  April  24,  1874 
to  July  1,  1881.39 

CORPORATION  TAXES 

Corporations  may  be  taxed  in  three  ways.  "The  first 
consists  in  subjecting  corporations  to  the  general  property  tax 
only,  the  second  in  imposing  special  taxes  in  addition  to  the 
general  property  tax,  and  the  third  in  taxing  selected  classes  of 
corporations  by  special  methods  solely  for  state  purposes."40 

In  summarizing  the  bases  of  corporation  taxes  Professor 
Seligman  enumerates:  (1)  Value  of  the  property;  (2)  cost  of 
the  property;  (3)  capital  stock  at  par  value;  (4)  capital  stock 
at  market  value;  (5)  capital  stock  plus  bonded  debt  at  market 
value ;  (6)  capital  stock  plus  total  debt,  both  funded  and  floating ; 
(7)  bonded  debt  or  loans;  (8)  business  transacted;  (9)  gross 
earnings;  (10)  dividends;  (11)  capital  stock  according  to 
dividends;  (12)  net  earnings;  and  (13)  franchise.41 

Other  than  the  special  methods  of  taxing  all  mines,  no 
special  method  of  taxation  has  been  enacted  applying  to  mining 
corporations  as  distinguished  from  other  types  of  corporations. 
In  certain  states  employing  license  taxes,  licenses  may  be 

36i5  Wall.  232. 
374O  Md.  22. 
3873  Pa.  370. 
*9Suf>ra,  p.  67. 

*°Taxation  of  Corporations,  Part  V,  p.  4,  Report  of  U.  S.  Commis- 
sioner of  Corporations,  1914. 

"Seligman,  Essays  in  Taxation,  8th  Ed.,  p.  218. 


661]  METHODS  OP  STATE  TAXATION  131 

required  of  mines  or  mining  plants,  as  in  Florida42  and  Louis- 
iana.43 

Many  of  the  large  mining  companies  are  incorporated  in 
states  which  do  not  rank  among  the  important  mineral  produc- 
ing states  and  are  subject  to  taxation  under  the  laws  of  the 
state  in  which  they  are  incorporated  as  well  as  under  the  laws 
of  the  state  in  which  they  are  operating.4* 

STATE  INCOME  TAX 

A  state  income  tax  is  authorized  by  legislative  enactment 
in  Mississippi,  North  Carolina,  Oklahoma,  South  Carolina,  Vir- 
ginia, and  Wisconsin.  In  addition  to  the  states  noted  taxation 
of  income  is  permitted  by  the  constitution  of  Arizona,  California, 
New  Mexico,  Ohio,  and  Utah,  but  none  of  them  is  now  taxing 
incomes. 

Under  the  general  property  tax,  Massachusetts  taxes 
incomes  in  excess  of  $2,000  derived  from  property  not  taxed. 
With  the  exception  of  Wisconsin,  the  taxes  levied  upon  incomes 
are  apparently  directed  at  individuals,  but  the  Wisconsin  tax 
is  levied  upon  corporations  as  well  as  individuals,  firms  and  co- 
partnerships. The  Wisconsin  law*6  was  enacted  in  1911  and 
amended  in  1913. 

The  rate  levied  upon  the  income  of  corporations  is  gradu- 
ated as  follows: 

Two  percent  on  the  first  $1000  of  taxable  income  or  any 
part  thereof,  two  percent  on  the  second  $1000  or  part,  and 
increasing  by  one-half  percent  on  each  $1000,  to  a  maximum  of 
six  percent  on  all  taxable  income  in  excess  of  $7,000.46 

The  term  "income"  is  defined  to  include  "all  royalties 
derived  from  mines",47  and  it  is  specified  that  "taxable  income, 
rentals,  royalties  and  gains  or  profit  from  the  operation  of  a 
mine  or  quarry  shall  follow  the  situs  of  the  property  from  which 
derived,  and  income  from  personal  service  and  from  land  con- 

*2Laws  of  Florida,  chap.  5597,  sec.  8. 

**Laws  of  Louisiana,  1912,  Act.  209,  sec.  I  and  2. 

**See  Reports  I  to  VI  on  Taxation  of  Corporations  and  Special  Report 
on  Taxation,  1913,  United  States  Bureau  of  Corporations.  See  also 
Taxation  and  Revenue  Systems  of  State  and  Local  Governments,  Bureau 
of  Census,  1914. 

4*Laws  of  1911,  chap.  658;  Laws  of  1913,  chap  27,  443,  487,  554, 
615,  and  720. 

**Laws  of  1913,  chap.  720,  sec.  io87m-6. 

47Ibid.,  sec.  1087-111-2. 


132  MINE  TAXATION  IN  THE  UNITED  STATES  [662 

tracts,  mortgages,  stocks,  bonds,  and  securities  shall  follow  the 
residence  of  the  recipient." 

In  estimating  the  income  from  mines,  a  corporation  is  per- 
mitted to  make  deductions,  "including  a  reasonable  allowance 
for  depreciation  by  use,  wear,  and  tear  of  property  from  which 
income  is  derived  and  an  allowance  for  depletion  of  ores  and 
other  natural  deposits  on  the  basis  of  their  actual,  original  cost 
in  cash  or  the  equivalent  of  cash."48  A  similar  deduction  is 
permitted  individuals  owning  mines.  Depreciation  is  never 
allowed  in  excess  of  that  actually  recorded  on  the  books  of  the 
corporation. 

The  dividends  declared  by  a  going  corporation,  including 
mining  corporations,  will  be  conclusively  presumed  for  purposes 
of  income  taxation  as  against  stockholders  to  be  from  net  earn- 
ings or  profits,  so  that  it  cannot  be  claimed,  to  avoid  an  income 
tax,  that  the  dividends  were  really  declared  from  the  capital.483 

Upon  the  rehearing  in  1915,  the  foregoing  ruling  of  the 
court  was  reaffirmed.  Mr.  Justice  Barnes  who  dissented  stated 
at  length  his  concept  of  income  and  pointed  out  that  dividends 
from  mines  are  in  a  sense  ' '  gross  income ' '  if  the  word  ' '  income ' ' 
may  be  applied  at  all.  ' '  The  ore  in  the  mine  was  a  capital  asset 
having  a  determinable  tonnage  value.  Any  profit  made  in  the 
process  of  mining  and  marketing  the  ore  was  income.  But  the 
value  of  the  ore  in  the  mine  was  not  income.  The  capital  assets 
of  the  corporation  were  reduced  to  the  extent  of  the  value  of 
that  ore  by  taking  it  out.  When  the  money  received  was  dis- 
tributed, the  stockholders  had  money  in  lieu  of  an  undivided 
interest  in  a  quantity  of  iron  ore  equal  in  value  to  the  money 
received."  The  change  of  one  form  of  corporate  assets  into  an- 
other is  not  in  itself  the  production  of  income.48b 

A  mining  corporation,  operating  under  a  lease,  was  granted 
a  deduction  from  its  state  income  tax  of  $16,173.58  for  royalties 
paid  but  claimed  that  it  was  entitled  to  an  additional  deduction 
of  $65,000  for  ore  depletion  during  the  year.  The  Supreme 
Court  of  Wisconsin  held  that  a  leasehold  interest  is  not  equiva- 
lent to  ownership  for  purposes  of  income  taxation  and  the  de- 
duction for  royalties  is  the  only  deduction  to  which  a  mining 
lessee  is  entitled  in  respect  to  ore.48c 

**Ibid.,  sec.  1087-01-3. 

*«*Van  Dyke  v.  City  of  Milwaukee,  146  N.  W.  812  (1914)- 
48bi5o  N.  W.  509,  (1915). 

48CKlar  Piquett  Mining  Co.  v.  Town  of   Platteville,  157  N.  W.  763, 
(1916). 


663]  METHODS  OP  STATE  TAXATION  133 

The  state  of  Connecticut  has  inaugurated  "an  income  tax 
on  corporations  based  upon  the  report  to  the  federal  govern- 
ment. The  rate  is  two  per  cent  upon  the  net  taxable  amount 
reported  to  the  federal  government."49 

The  proposed  equated  income  tax  is  discussed  in  Chapter  VI. 

TAX  ON  ROYALTIES  OR  LEASES 

The  practice  of  taxing  income,  as  for  example  mining 
"royalties",  has  not  been  common  in  the  United  States.  With 
the  enactment  and  enforcement  of  income  tax  laws,  the  federal 
government  will  secure  revenue  from  this  source.  In  various 
states  the  income  from  mining  leases  is  noted  by  the  assessor 
who  determines  what  the  market  value  of  the  leasehold  is  on 
the  basis  of  the  returns.  The  holder  of  the  lease  is  then  assessed 
at  this  estimate  and  taxed  at  the  regular  property  tax  rate. 
Usually  by  the  terms  of  mining  leases  in  the  United  States,  it 
is  specified  that  the  property  owner  shall  pay  all  taxes.50 

As  previously  noted51  the  license  tax  in  Louisiana  was  inter- 
preted by  the  courts  to  be  a  tax  on  the  business  of  mining  and, 
if  the  royalty  was  deducted  before  the  tax  upon  the  operator 
was  figured,  the  owner  of  the  land  or  mining  right  could  not 
be  forced  to  pay  a  license  tax  on  the  royalty  as  he  is  not  in  the 
mining  business.52 

The  Minnesota  Supreme  Court  has  held  recently  that  iron 
ore  royalties  accruing  to  resident  fee  owners  of  St.  Louis  County 
mines  are  not  taxable  under  under  the  classification  of  "moneys 
and  credits."  In  the  opinion  of  the  court  royalties  are  rents 
and  unaccrued  rents  are  real  estate.  They  are  taxed  under  the 
laws  by  the  taxation  of  real  estate  and  not  as  personal  property. 
They  should  therefore  not  be  listed  and  taxed  as  "credits."  This 
reverses  the  decision  of  the  district  court.53 

49Corbin,  W.  H.  in  Proceedings  of  National  Tax  Association,  1915, 
IX,  260. 

50In  Great  Britain  it  is  customary  to  levy  a  tax  upon  royalties  from 
mining  properties.  Proceedings  of  National  Tax  Association,  1908, 
II,  417- 

^Supra,  p.  50. 

"For  additional  data  on  royalties  see  pp.  20,  35.  72,  75,  and  120. 

"State  v.  Royal  Mineral  Association,  156  N.  W.  128,  (1916). 


CHAPTER   VI 

THE  SYSTEMS  OF  MINE  TAXATION  COMPARED 

The  various  systems  of  mine  taxation  previously  enumerated 
differ  essentially  in  respect  to  the  base  upon  which  the  rate  is 
levied.  In  most  of  the  states  the  same  rate  that  is  applied  to 
all  property,  assessed  under  the  general  property  tax,  is  applied 
to  the  value  of  mining  property,  to  the  value  of  output  of  the 
mine,  or  to  the  net  proceeds  of  mines.1  With  a  more  or  less 
uniform  rate,  it  is,  therefore,  important  to  consider  whether  the 
base  is  a  true  measure  of  ability. 

In  the  following  section  the  principal  points  that  will  be 
discussed  are:  (a)  Methods  of  determining  the  base  and  the 
rate;  (b)  the  certainty  and  stability  of  public  revenue  from 
mines  under  the  several  systems;  (c)  the  amount  of  the  taxes 
paid  during  the  life  of  a  mine  under  the  several  systems;  (d) 
the  effect  of  taxation  upon  the  method  and  the  rate  of  develop- 
ment of  mines;  and  (e)  the  systems  as  applied  to  unproductive 
mining  property. 

General  property  tax.  Under  the  general  property  tax, 
mines  are  usually  valued  upon  the  same  theory  that  other  prop- 
erty is  valued,  namely,  that  ability  to  pay  taxes  is  measured  by 
the  value  of  the  property  owned.  The  base  that  is  determined 
by  assessment  and  equalization  is  supposed  to  bear  the  proper 
ratio  to  other  assessed  values,  whether  the  property  be  a  mine, 
a  house,  or  a  farm,  and  all  of  these  assessments  are  based  on 
present  value.  Assuming  it  is  intended  that  the  burden  of 
taxation  shall  be  distributed  upon  all  property  in  proportion  to 
its  present  value  and  that  all  property  will  be  valued  upon  the 
same  basis  and  taxed  at  the  same  rate,  the  general  property  tax 
presents  no  greater  evils  when  applied  to  mines  than  when 
applied  to  other  property.  The  principal  difficulty  has  been 
in  the  appraising  of  mines  for  taxation.  Owing  to  the  fact  that 
the  value  of  a  mine  changes  from  day  to  day  as  the  quantity 
and  the  quality  of  the  "ore  in  sight"  change  with  the  advance 

1The  details  of  methods  of  appraisal  will  be  considered  later.     Infra 
P-  153- 

134 


665]  COMPARISON  OP   METHODS  135 

of  the  working  faces  and  the  removal  of  mineral,  mine  appraisal 
involves  problems  not  found  in  the  assessing  of  real  estate  of 
the  ordinary  type.  These  problems,  however,  are  the  same  ones 
that  mining  engineers  must  deal  with  in  determining  the  pur- 
chase price  or  the  sale  price  of  mining  property.  The  changing 
conditions  in  many  mines  may  require  frequent  inspection  by 
the  appraiser  and  the  expense  entailed  may  be  entirely  out  of 
proportion  to  the  public  revenue  derived.  This  difficulty  of 
determining,  without  too  great  expense,  a  base  which  will  result 
in  justice  to  all  taxpayers  has  been  one  of  the  most  serious 
objections  to  the  general  property  tax  as  applied  to  the  taxation 
of  mines. 

Some  of  the  state  laws  prescribe  how  property  shall  be 
assessed  and  the  method  by  which  the  assessor  shall  arrive  at 
an  approved  valuation.  As  an  illustration,  the  laws  of  Penn- 
sylvania prescribe  that  the  assessors  shall  assess,  rate,  and  value 
every  subject  of  taxation  according  to  the  actual  value  thereof 
and  at  such  rates  and  prices  as  the  same  would  bring  at  a  bona- 
fide  sale  after  due  notice.2  Other  states  have  similar  enact- 
ments. Owing  to  the  fact  that  sales  of  mines  are  not  frequent 
it  has  become  necessary  for  assessors  to  employ  methods  of  mine 
valuation  that  have  been  used  under  other  and  somewhat  differ- 
ent circumstances.  In  the  anthracite  fields  of  Pennsylvania  the 
following  methods  have  been  proposed : 

1.  Valuation  based  upon  sales. 

2.  Valuation  based  on  foot-acres  of  coal  remaining  in  the 
ground. 

3.  Valuation  based  on  royalty  rates. 

4.  Valuation  based  on  capitalized  estimated  profits.3 
According  to  the  decisions  of  the  Supreme  Court  of  Penn- 
sylvania, the  sales-method  is  the  only    strictly    legal    one,  but 
prices  of  coal  lands  have  such  a  wide  range  owing  to  the  loca- 
tion of  the  land,  quality  of  the  coal,  etc.,  that  the  other  methods 
enumerated  have  been  used  extensively  by  the  assessors.     The 
foot-acre  method  involves  determining  the  total  thickness  of  coal 
per  acre  remaining  unmined.    However,  as  it  is  practically  im- 
possible to  determine  the  thickness  and  quality  of  coal  in  advance 
of  working,  the  Supreme  Court  of  Pennsylvania  has  declared 

2Laws  of  Pennsylvania,  1841,  Act  139. 

8Norris,  R.  V.    Taxation  of  coal  lands.    Proceedings  American  Mining 
Congress,  1913,  XVI,  331. 


136  MINE  TAXATION   IN   THE   UNITED   STATES  [666 

that  the  foot-acre  method  is  not  a  "proper  measure"  of  the 
value  of  coal  lands  for  the  purpose  of  taxation.4 

On  the  royalty  basis  the  estimated  tonnage  of  coal  would 
be  valued  at  the  current  royalty  rate.  To  this  practice  the 
Supreme  Court  of  Pennsylvania  has  objected  in  the  following 
language :  ' '  Market  value  is  its  fair  selling  value  for  cash,  not 
payable  as  royalty  strung  out  through  a  long  series  of  years, 
but  payable  at  the  time  or  as  soon  thereafter  as  the  value  could 
be  determined.  Such  a  method  does  not  make  allowance  in 
undeveloped  territory  for  the  length  of  time  coal  may  lay  in 
the  ground  unmined,  undeveloped,  and  unprofitable.  It  is  im- 
possible to  reduce  to  a  scientific  basis  and  to  mathematical  pre- 
cision the  elements  of  value  entering  into  the  present  selling 
price  of  a  tract  of  coal  land.  The  question  is  not  what  earning 
power  coal  lands  may  develop  in  the  future,  but  what  they  are 
actually  worth  in  the  market  at  present."5 

The  method  of  capitalizing  earnings  has  not  been  used  in 
Pennsylvania.  This  method  of  valuation  of  property  has  been 
in  use  many  years  and  has  been  emphasized  in  connection  with 
mining  by  Mr.  H.  C.  Hoover.  "The  cardinal  principle  of 
Hoover's  system  of  valuation  is  simply  that  the  value  of  a 
mine  is  a  capitalization  of  future  profits.  Given  the  margin  of 
profit  in  an  ore,  the  amount  of  ore,  and  the  time  required  to  get 
the  profit,  the  value  is  merely  that  profit  as  it  will  appear  in  a 
series  of  dividends  discounted  from  the  future  date  of  pay- 
ment. '  '6 

*22Q  Pa.  465,  (1911). 

5229  Pa.  470,  (1911). 

6Finlay,  J.  R.  Valuation  of  Iron  Mines.  Transactions  American 
Institute  of  Mining  Engineers,  1913,  XLV,  282.  In  order  that  the  relation 
of  taxes  to  the  exhaustion  of  mines  may  be  presented  as  forcibly  as 
possible,  a  few  of  the  most  modern  ideas  of  mining  economics  are 
introduced  as  notes  at  this  point. 

A  mine  has  been  defined  as  'a  limited  deposit  of  valuable  ore,  and 
that  to  make  the  greatest  profit  from  it  requires  that  the  deposit  be  worked 
out  rapidly."  (Hoover,  H.  C.  Principles  of  Mining,  142,  New  York,  1909. 

"The  main  factor  in  this  proposal  is  the  time  value  of  money;  not 
only  the  money  tied  up  in  the  investment,  but  of  the  money  to  be  returned 
by  the  investment.  It  follows  that  the  true  interest  of  a  mine  owner  is 
not  to  perpetuate  an  income,  but  to  complete  a  job ;  not  to  prolong  the 
life  of  his  mine,  but  to  shorten  it  by  exhausting  all  profitable  ore  and 
getting  the  money  into  something  else  as  soon  as  possible.  Good  economy, 
by  Hoover's  theory,  demands  that  the  ore  reserves  be  ruthlessly  slashed 


667]  COMPARISON  OP   METHODS  137 

The  principle  of  capitalization  of  earnings  assumes  a  defi- 
nite output  and  definite  earnings  from  a  developed  tonnage  in 
the  mine.  It  involves  practically  the  same  investigation  as  is 
required  in  the  physical  valuation  of  a  mine.  The  physical 
valuation  of  a  mine  requires  more  than  a  listing  of  lands,  build- 
ings, equipment  and  tonnage  and  quality  of  material  in  reserve. 
It  necessitates  estimating  the  life  of  the  property  and  the  aver- 
age annual  earnings  from  the  available  data  on  the  cost  of 
production  and  the  average  price  to  be  obtained  for  the  product. 
The  capitalization  of  these  average  annual  earnings  at  an  as- 
sumed rate  of  interest  will  give  the  present  value  of  the  mine.7 

Both  the  method  of  physical  valuation  and  that  of  capital- 
izing the  earnings  involve  estimating  the  amount  that  shall  be 
set  aside  for  depreciation  of  the  mine  and  of  the  equipment. 
These  systems  are  well  adapted  to  mines  in  which  the  total 
available  tonnage  of  mineral  may  be  known  years  in  advance, — 
or  completely  when  the  mine  is  opened, — by  drilling  and  by  sam- 
pling. If  no  extensions  of  the  mineral  deposits  are  developed 
and  no  new  deposits  are  opened,  the  value  of  the  mine  will 
decrease  annually  as  the  mineral  is  removed.  A  system  of 
physical  valuation  or  of  capitalization  of  earnings  allows  prop- 
erly for  the  depletion  of  the  mineral  reserves  of  the  mine. 

Assume  that  a  particular  mine,  valuable  for  a  deposit  whose 
extent  has  been  determined,  is  subject  to  taxation  under  the 
general  property  tax.  During  the  first  year  the  sum  paid  in 
taxes  would  be  the  largest  in  the  history  of  the  mine  if  the  tax 
rate  is  maintained  uniformly,  for  as  the  ore  in  the  mine  is 
worked  out  the  tax  burden  on  the  mine  would  become  lighter 
each  succeeding  year  because  the  assessed  value  would  be  less. 
In  order  to  raise  annually  the  same  amount  by  taxation,  assum- 
ing that  the  value  of  other  property  remains  constant,  it  would 

by  getting  out  the  best  ore  first,  in  preference  to  poorer  ore,  there  being 
no  logical  reason  why  any  profit  should  be  sacrificed  in  order  to  make 
a  showing  of  stability."  (Finlay,  J.  R.  Mine  valuation.  Engineering  and 
Mining  Journal,  1912,  XCIII,  1238). 

Stability  of  income  during  a  period  of  years  has  been,  however, 
one  of  the  ambitions  of  many  enterprising  and  conservative  mine  operators. 
The  fact  remains  nevertheless  that  the  exhaustion  of  mines  proceeds 
rapidly  and  inevitably,  and  the  community  in  which  mines  are  located 
must  recognize  the  fact,  that  public  revenue  from  mines  may  continue 
during  a  comparatively  short  period  of  time. 

7Steele,  H.  Mine  taxation,  Engineering  and  Mining  Journal,  1914, 
XCVII,  381. 


138  MINE  TAXATION   IN   THE   UNITED   STATES  [668 

be  necessary  to  increase  the  rate  on  all  property  or,  by  equali- 
zation, to  appraise  all  property  higher.  The  continued  decline 
in  the  value  of  the  mine  would  thus  gradually  shift  the  tax 
burden  upon  other  property  until  finally  the  mine  would  pay 
no  taxes  whatever. 

If  the  finances  of  the  property  be  managed  judiciously  the 
assets  of  the  company,  including  the  present  value  of  the  mine 
and  of  the  sinking  fund,  will  be  practically  and  continually 
constant.  The  taxes  paid  upon  the  physical  valuation  of  the 
mine  may  grow  less  from  year  to  year  as  the  mine  is  being 
worked  out,  but  if  the  entire  assets  of  the  company  are  subject 
to  taxation  at  the  site  of  the  mine,  the  total  sum  paid  in  taxes 
by  the  mining  company  may  be  maintained  practically  constant 
during  the  life  of  the  mine.  This  latter  condition  however  sel- 
dom prevails  as  the  funds  set  aside  for  the  redemption  of  the 
capital  invested  are  frequently  deposited  or  reinvested  outside 
of  the  mining  district  and  are  subject  to  taxation  where  they 
are  deposited  or  invested.  Generally,  then,  it  may  be  assumed 
that  a  mine  with  known  mineral  resources,  operating  with  an 
uniform  annual  output,  will  pay  a  constantly  decreasing  sum 
for  taxes  if  taxed  under  the  general  property  tax  and  appraised 
upon  a  physical  basis. 

The  taxes  paid  under  the  general  property  tax  by  a  mine 
whose  annual  output,  earnings,  and  life  can  be  estimated  ap- 
proximately may  be  represented  as  a  diminishing  annuity 
through  the  period  of  production  or  life  of  the  mine.8 

Instead  of  the  methods  of  valuation  or  assessment  pre- 
viously noted,  the  base  may  be  determined  by  state  law  as  some 
multiple  or  fraction  (1)  of  the  gross  value  of  the  output,  or 
(2)  of  the  gross  earnings  after  certain  specified  deductions  have 
been  made,  or  (3)  of  the  net  earnings.  Upon  the  base  deter- 
mined in  this  manner,  the  same  rate  may  be  applied  as  is  levied 
on  other  property.  In  order  to  determine  the  suitability  of  each 
type  of  base,  it  will  be  well  to  consider  whether  justice  will  be 
secured  among  mines  operating  upon  various  kinds  of  mineral 
deposits  as  well  as  among  different  mines  operating  upon  the 
same  type  of  deposit. 

8In  comparing  the  tax  burden  of  mines  under  the  several  systems 
it  will  be  necessary  to  assume  certain  more  or  less  theoretical  condi- 
tions in  order  that  the  results  under  the  several  systems  may  be 
demonstrated.  In  each  case  the  real  measure  of  the  public  revenue  from 
mines  should  be  taken  to  be  either  the  present  valuation  or  the  amount  of 
all  the  taxes  paid  during  the  life  of  the  mine. 


669] 


COMPARISON   OF   METHODS 


139 


If  all  mines  produced  minerals  of  the  same  net  value  per 
ton,  the  system  of  appraising  upon  the  market  value  of  the  out- 
put would  not  work  inequality  among  the  mines;  but  it  places 
upon  the  same  basis  gold  mines,  copper  mines,  iron  mines,  oil 
wells,  etc.,  whose  product  annually  may  be  of  equal  market  value 
but  whose  earning  power  may  differ  widely.  Similarly,  a  gold 
mine  producing  a  large  tonnage  of  low  value  and  requiring  a 
large  capital  investment,  may  be  earning  annually  but  a  small 
profit  while  the  gross  value  of  the  product  may  be  the  same  as 
that  of  the  product  of  a  high  grade  mine  with  small  investment. 
The  assumption  that  ability  may  be  measured  justly  by  a  tax 
on  the  gross  value  of  output  is  entirely  unwarranted.  Table 
No.  I  is  based  upon  statistics  from  the  13th  Census,  Volume  XI, 
and  shows  the  gross  and  the  net  value  of  the  output  of  coal, 
precious  metal,  copper,  iron,  and  lead  mines  and  oil  and  gas 
wells  of  the  United  States  for  the  year  1909. 

TABLE  No.  i. 

STATISTICS  OF  MINES,   SHOWING  RATIO   BETWEEN  SURPLUS  AND  GROSS  VALUE 

OF   PRODUCT. 


Product 

Gross 
value 

Expenses 
of  operation 

Surplus 
above 
expense 
of  operation 

Surplus  in 
percent  of 
gross 
value 

Coal,  anthracite.-  
Coal,  bituminous  

$149,180,471 
427,962,464 

$139,324,467 
395,907,026 

$    9,865,004 
32,055,438 

6.6 
7-49 

Iron    

106,947,082 

74,071,830 

32,875,252 

30.74 

Conner 

134.616,987 

107,679,312 

26,917,67s 

2O.OI 

Precious  metals,  deep 
mines.-  

83,885,928 

68,764,692 

15,121,236 

18.03 

placers 

10,237,252 

6,810,482 

3,426,770 

"^•47 

Lead  and  zinc  

31,363,094 

24,453,299 

6,909,795 

22.03 

Petroleum  and  natural 
eras 

185,416,684 

135,638,644 

49,778,040 

26.85 

While  the  present  value  can  not  be  estimated  from  the  an- 
nual net  earnings  alone,  yet  an  inspection  of  the  table  of  gross 
value  of  output,  operating  expenses,  and  surplus  above  operat- 
ing expenses  shows  that  among  the  various  divisions  of  the 
mineral  industry  there  is  a  wide  range  in  the  ratio  between 
gross  value  of  product  and  surplus  above  operating  expenses. 


140  MINE  TAXATION   IN   THE  UNITED   STATES  [670 

In  the  anthracite  industry  the  surplus  is  6.61  percent  of  the 
value  of  the  gross  output ;  in  the  bituminous  coal,  7.49  percent ; 
in  the  deep  precious  metal  mines,  18.03  percent;  in  the  copper, 
20.01  percent;  in  the  lead  and  zinc,  22.03  percent;  in  petroleum 
and  natural  gas  wells,  26.85  percent;  in  iron  mines,  30.74  per- 
cent; and  in  gold  placers,  33.47  percent. 

The  iron  mines  of  the  United  States  produced  ore  which 
sold  for  about  one-fourth  as  much  as  the  bituminous  coal  mined, 
yet  the  surplus  above  operating  expenses  of  the  iron  mines  was 
practically  the  same  as  that  of  the  bituminous  coal  mines.  The 
operating  expenses  of  the  anthracite  mines  and  of  the  oil  and 
gas  wells  were  practically  the  same,  but  the  oil  and  gas  wells 
had  a  surplus  five  times  as  great  as  the  coal  mines. 

It  would  apparently  be  unfair  to  declare  without  further 
investigation  that  the  value  of  the  output  of  a  mine  should  be 
taken  as  the  true  present  value  of  the  mine  and  be  entered  upon 
the  tax  rolls  together  with  ordinary  real  estate  and  personal 
property  which  have  been  valued  upon  a  sales  basis.  The  pres- 
ent value  of  a  mine  is  determined  not  by  gross  output  but  by 
net  earnings  throughout  the  life  of  the  mine. 

Between  individual  mines,  as  has  been  noted,  there  may 
be  a  great  difference  in  operating  costs.  Two  adjacent  mines 
may  produce  the"  same  volume  of  product  of  the  same  quality 
but  the  operating  costs  of  the  one  may  be  much  higher  than 
those  of  the  other.  If  the  life  of  both  mines  is  the  same  the 
present  value  of  the  one  mine  may  greatly  exceed  the  other  on 
account  of  the  difference  in  operating  costs.  There  will  thus  be 
injustice  in  appraising  mines  simply  at  or  in  proportion  to  the 
value  of  the  output. 

The  foregoing  statements  apply  to  producing  mines.  If  a 
mine  is  not  producing  it  would  not  be  appraised  at  all  on  the 
output  or  on  the  earnings  basis.  A  productive  but  non-profitable 
mine  would  be  taxed  on  the  basis  of  output  but  would  be 
exempt  if  the  basis  is  either  net  earnings  or  capitalized  net 
earnings. 

Non-productive  mining  property  would  be  taxed  only  under 
the  plan  of  physical  valuation  or  appraisal  upon  the  sales 
method.  It  has  been  claimed  by  some  writers  that  the  method 
of  mine  appraisal  and  the  system  of  taxation  may  influence 
materially  the  method  and  rate  of  the  development  of  the  mine.9 

•Zander,   C.   M.   in  Proceedings  of  National  Tax  Association,   1913, 
VII,  387. 


671]  COMPARISON  OF   METHODS  141 

This  has  been  discussed  particularly  in  connection  with  the  gen- 
eral property  tax  when  mines  are  valued  upon  a  physical  basis. 
The  objection  raised  is  that  systematic  development  of  the  mine 
may  open  up  large  reserves  of  mineral  which  will  not  be  re- 
moved from  the  ground  for  many  years  owing  to  the  system  of 
mining  and  the  existence  of  sufficient  developed  mineral  to 
maintain  the  current  rate  of  production.  If  these  new  reserves 
are  not  mined  for  many  years  they  may  have  but  little  present 
value.  Their  location  may  not  warrant  opening  a  new  mine 
and  they  may  be  of  little  value  to  another  operator  owing  to 
the  cost  of  the  separate  shafts  and  the  equipment  which  separate 
ownership  would  necessitate.  If  the  mines  and  the  mineral 
deposits  are  appraised  on  a  scientific  basis  proper  allowance  is 
usually  made  for  such  contingencies.  In  a  number  of  states, 
however,  it  has  been  held  that  such  tonnage  should  be  appraised 
upon  the  basis  of  average  sales  of  mineral  of  equal  quality.10 

The  essential  value  to  the  appraiser  of  information  regard- 
ing developed  mineral  reserves  is  that  it  gives  him  a  reliable 
basis  for  estimating  the  life  of  the  mine.  It  has  been  held  by 
some  engineers  that  a  mine  may  have  too  much  ore  developed  if 
proper  charges  for  the  cost  of  development  are  made  against 
each  ton.  Mr.  Finlay  has  well  emphasized  the  relatively  greater 
importance  of  a  small  difference  in  the  market  price  per  unit 
of  the  product  than  of  a  difference  of  a  few  years  in  the  life  of 
a  mine,  assuming  of  course  that  the  mineral  deposit  is  of  suffi- 
cient extent  and  value  to  return  the  capital  investment.  This 
applies  to  every  kind  of  a  mine  except  a  gold  mine.  He  cites 
an  important  mine  earning  over  a  million  dollars  a  year,  with 
an  assured  life  of  ten  years  and  a  possible  life  of  twenty  years. 
"If  it  lasts  twenty  years  this  mine  will  be  worth,  say  $12,000,- 
000;  if  it  lasts  only  ten  years  it  will  be  worth  $7,500,000.  If, 
however,  the  price  of  its  ore  falls  eleven  percent  it  will  only  be 
worth  $7,500,000  if  it  lasts  the  full  twenty  years.  If,  on  the 
other  hand  the  price  of  ore  rises  eleven  percent,  it  will  be  worth 
well  over  $10,000,000  with  ten  years  life.  This  difference  in 
price  is  no  more  than  two  men  might  readily  disagree  about ;  for 
instance,  it  is  a  difference  about  equal  to  that  between  13.5  and 
15  cent  copper."11 

10Details  regarding  the  classification  of  various  grades  of  mineral 
reserves  will  be  presented  in  Chapter  VII. 

"Finlay,  J.  R.  Mine  Valuation.  Engineering  and  Mining  Journal, 
1912,  XCIII,  1238. 


142 


MINE   TAXATION   IN   THE  UNITED   STATES 


[672 


This  same  idea  regarding  the  real  future  value  of  the  min- 
eral reserves  has  been  forcefully  emphasized  by  Mr.  Norris  in 
discussing  the  problems  of  valuation  in  the  Pennsylvania  anthra- 
cite fields.12  Assuming  that  a  company  owns  five  tracts  of  coal 
land,  each  containing  2,000,000  tons  of  coal,  to  be  worked,  one 
tract  at  a  time  in  sequence  and  at  the  rate  of  100,000  tons  per 
year,  and  assuming  that  this  entire  tonnage  is  appraised  on  the 
basis  of  the  present  royalty  rate,  each  tract  will  have  an  assessed 
value  of  $400,000  and  will  pay  approximately  eight  thousand 
dollars  annually  in  taxes.  On  a  six  percent  basis  the  present 
value  of  each  of  the  five  tracts  has  been  calculated  and  will  be 
as  follows: 


Start 
mining 
in  year 

Complete 
the  min- 
ing in 

Present 
value  of 
royalties 

Less  pres- 
ent value 
of  taxes 

Net 
present 
value 

First      

o 

20 

$^44,100 

$  58,880 

$285,220 

Second  

20 

40 

107,360 

110,120 

-2,760 

Third 

4.0 

60 

^,SSO 

126,100 

-Q2.55O 

Fourth 

60 

80 

10,4.10 

131,080 

-120,650 

Fifth  

80 

IOO 

•*,2  so 

I12.S5O 

-129,300 

According  to  these  estimates  the  tract  mined  during  the 
first  twenty  years  will  earn  royalties  having  a  present  value  of 
$344,100.  If  the  present  value  of  the  taxes,  given  as  $58,880, 
be  deducted,  the  net  present  value  is  $285,220.  Estimates  show 
by  similar  calculations  that  the  present  value  of  the  royalties 
earned  by  the  second  tract  is  $2,760  less  than  the  present  value 
of  the  taxes  on  this  tract.  The  excess  of  the  present  value  of 
the  taxes  over  the  present  value  of  the  royalties  of  the  tract 
mined  after  the  eightieth  year  is  $129,300. 

The  principal  advantages  claimed  for  the  general  property 
tax  system  as  applied  to  mines  are : 

1.  The  public  revenue  secured  in  this  manner  does  not 
vary  much  from  year  to  year. 

12Norris,   R.   V.     Taxation    of    coal   lands.     Proceedings   American 
Mining  Congress,  1913,  XVI,  331. 


673]  COMPARISON   OP    METHODS  143 

2.  The  cost  of  administration  is  not  high  for  most  types  of 
mining  property  after  an  adequate  system  of  appraisal  has  been 
established. 

3.  By  adjusting  the  rate,  considerable  elasticity  is  possible. 

4.  All  classes  of  mining  property  may  be  reached  if  the 
system  is  intelligently  and  forcibly  administered. 

5.  The  depreciation  of  mining  property  by  the  exhaustion 
of  the  mineral  is  properly  recognized. 

The  most  important  disadvantages  and  objections  raised 
against  the  system  are: 

1.  The  appraisal  for  taxation    requires    the    services    of 
technically  trained  men. 

2.  Certain  types  of  property  are  difficult  to  appraise. 

3.  Certain  assumptions  must  be  made  in  many  appraisals. 

4.  The  expense  of  appraising  certain  types  of  property  may 
be  out  of  proportion  to  the  value  of  the  property  and  the  revenue 
secured. 

5.  Mines  in  process  of  development  and  also  unprofitable 
mines  are  taxed. 

6.  It  may  tend  to  hasten  the  mining  of  proven  bodies  of 
the  best  ore  in  order  to  shorten  the  period  during  which  the 
ore  is  taxed. 

7.  It  may  restrain  development. 

Output  taxes.  It  is  assumed  that  by  an  output  tax  is  meant 
a  tax  levied  upon  the  gross  value  of  the  output  at  a  rate  different 
from  the  rate  applied  upon  property  appraised  under  the  gen- 
eral property  tax.  Under  this  system  the  taxing  district  appro- 
priates to  itself  a  part  of  the  gross  income  of  a  mine  irrespective 
of  the  capital  invested,  of  the  operating  expenses,  of  the  net 
earnings,  and  of  the  life  of  the  mine.  Unless  there  is  a  gradu- 
ated rate,  each  mine  will  pay  taxes  each  year  in  proportion  to 
the  market  value  of  the  total  product.  It  is  evident  that  certain 
assumptions  must  be  made  by  the  officials  who  fix  the  rate  that 
shall  govern.  This  rate  may  be  determined  in  several  ways: 

1.  By  requiring  each  industry  to  bear  a  certain  propor- 
tion of  the  entire  public  expenses.  In  a  certain  state,  for  exam- 
ple, it  is  proposed  that  mining  shall  bear  one-eighth  of  the  tax 
burden.  The  apportioning  of  the  tax  burden  among  the  indus- 
tries and  the  interests  of  the  State  must  be  done  more  or  less 
arbitrarily  on  the  basis  of  capital  invested,  annual  earnings, 
value  of  output,  or  some  other  basis  upon  which  industries  may 
be  compared.  Assuming  that  in  some  manner  the  amount  to 


144  MINE  TAXATION  IN  THE  UNITED  STATES  [674 

be  raised  by  taxing  mines  is  known,  and  that  the  gross  value  of 
the  annual  output  is  known,  the  rate  may  be  determined  easily. 

2.  In  the  event  that  the  tax  burden  has  not  been  appor- 
tioned among  the  various  industries,  the  tax  rate  may  be  fixed 
arbitrarily  by  law  at  a  specified  percentage  of  the  gross  value 
of  the  output.    This  procedure  practically  establishes  a  leasing 
system  and  differs  from  the  system  of  taxing  tonnage  in  prin- 
ciple in  that  the  leasing  rate  or  royalty  is  a  percentage  of  the 
value  of  the  output,  rather  than  a  specific  amount  per  unit  of 
quantity  as  is  often  the  case  in  leasing. 

3.  Practically  the  only  other  method  of  determining  the 
rate  is  by  arbitrarily  establishing  a  rate  within  the  taxing  dis- 
trict.   This  would  be  apt  to  cause  inequality  in  the  burden  of 
taxation  and  the  power  to  fix  rates  might  be  abused  by  local 
officials.    As  previously  noted  the  output  tax  is  not  used  exten- 
sively in  the  United  States.13 

Under  the  existing  output  tax,  mines  pay  a  specific  per- 
centage of  the  gross  value  of  the  output.  In  1913,  the  Penn- 
sylvania Legislature  enacted  a  law  providing  for  a  tax  of  two 
and  one-half  percent  upon  the  market  value  of  each  ton  of 
anthracite.  This  tax  is  in  addition  to  the  general  property 
tax.14  In  South  Carolina,  mines  are  taxed  upon  the  gross  value 
of  the  output  but  at  the  same  rate  that  property  is  taxed  under 
the  general  property  tax.15 

If  the  output  is  maintained  uniformly  throughout  the  life 
of  the  mine,  the  tax  would  of  course  be  uniform.  All  mines, 
having  the  same  output  in  any  year,  would  pay  the  same  taxes 
irrespective  of  the  capital  invested,  the  net  earnings,  the  life 

"This  method  of  taxation  has  been  used  extensively  in  Canada. 
Nova  Scotia  leases  gold  lands  and  collects  two  percent  of  the  gross 
value  of  the  output.  In  1913  British  Columbia  levied  two  percent  on  all 
mineral  products  except  coal.  The  gross  value  is  the  basis  in  this  tax 
system.  On  producing  mines  yielding  less  than  five  thousand  dollars  a 
year  there  is  granted  a  refund  of  half  the  tax,  while  placer  mines 
yielding  less  than  two  thousand  dollars  are  exempt  entirely.  Yukon 
Territory  levied  a  tax  of  2j^  percent  on  all  gold  shipped  out  of  the 
Territory.  The  provinces  of  Canada  have  preferred  taxing  gross  rather 
than  net  proceeds,  fearing  that  the  books  would  be  "doctored"  if  the 
taxes  were  figured  on  the  net.  The  mining  companies  would  object 
to  the  inquisitorial  powers  of  the  tax  assessor. 

Metal  mines  in  Mexico  are  taxed  on  the  value  of  the  output. 

^Pennsylvania  Laws,  1913,  Act.  374.    As  to  constitutionality  see  p.  68. 

"Code  of  South  Carolina,  1912,  Title  III,  chap.  XIV,  par.  304. 


675]  COMPARISON  OP  METHODS  145 

of  the  mine,  or  the  present  value  of  the  mine.  Assuming  that 
the  rate  is  uniform  and  that  the  output  of  the  mine  is  fairly 
regular  from  year  to  year,  the  public  revenue  would  be  uniform. 
The  system  of  taxing  output  is  favored  principally  for  the 
following  reasons: 

1.  It  is  not  difficult  to  administer  if  the  tax  law  is  specific. 

2.  It  is  economical  as  no  appraisal  of  mines  is  necessary. 

3.  It  offers  little  chance  for  tax  dodging  as  the  amount 
and  value  of  the  output  can  be  determined  readily. 

4.  Mines  are  taxed  when  they  are  producing,  and  it  there- 
fore is  a  convenient  system  for  the  mine  operator. 

5.  If  the  tax  is  graduated  the  burden  upon  the  poorer 
mines  may  be  reduced  and  that  upon  the  more  profitable  mines 
may  be  adjusted  accordingly. 

6.  Taxes  are  collected  during  the  entire  period  of  produc- 
tion in  proportion  to  the  output  and  irrespective  of  the  approach 
of  a  period  of  unproductiveness.    Only  the  present  is  considered. 

The  following  objections  have  been  raised: 

1.  The  revenue  secured  by  such  a  system  is  uncertain  in 
amount  and  may  vary  much  from  year  to  year. 

2.  Generally  there  is  no  discrimination  between  mines  as 
to  ability,  for  the  gross  value  or  volume  of  the  output  is  only 
occasionally  a  measure  of  the  value  of  the  mining  property. 

3.  The  future  or  life  of  a  mine  is  not  considered. 

4.  Unproductive  mines  or  lands  held  for  speculation  are 
not  taxed. 

5.  Productive  mines  that  are  unprofitable  and  mines  being 
developed  are  taxed. 

Tonnage  tax.  On  the  tonnage  basis  there  is  a  levy  of  a 
specific  charge  against  every  ton  or  unit  of  mineral  produced. 
Most  of  the  state  constitutions  will  not  permit  the  collection  of 
specific  taxes.  Michigan,16  Minnesota,17  Maryland,18  and  Penn- 
sylvania19 have  used  the  system.  A  tonnage  tax  is  levied  upon 
the  coal  produced  in  Canada.20  During  recent  years  there  has 

™Supra,  p.  52. 

"Supra,  p.  54- 

18In  Maryland  this  was  a  tonnage  tax  on  coal  carried  by  railroads. 
See  State  v.  Cumberland  &  P.  R.  Co.,  40  Md.  22,  (1874). 

19Suf>ra,  p.  66-67. 

20Nova  Scotia  collects  ten  cents  a  ton  on  all  of  the  coal  produced 
except  that  of  one  company  which  contracted  to  pay  twelve  cents  for  a 
period  of  99  years.  British  Columbia  levies  a  tax  of  ten  cents  per  ton 


146  MINE  TAXATION   IN   THE  UNITED   STATES  [676 

been  an  agitation  in  Michigan  to  impose  a  tonnoge  tax  again 
instead  of  the  general  property  tax. 

A  tax  per  unit  of  output  is  claimed  by  some  to  be  a  tax 
levied  on  the  principle  of  ability.  This  would  be  true  if  all 
mines  were  producing  at  the  same  cost  per  unit  of  output,  but 
this  is  never  the  case  and  the  burden  is  greater  upon  the  less 
profitable  mines.  The  percentage  of  earnings  per  unit  of  product 
which  goes  into  the  taxes  is  therefore  greater  for  the  poorer 
mines  than  for  the  richer  ones. 

The  determination  of  the  rate,  which  makes  the  tax  practi- 
cally a  royalty,  is  a  problem  which  requires  careful  attention. 
In  order  to  determine  this  rate,  either  there  must  be  some  effort 
to  equalize  the  burden  of  taxation  on  mines  as  compared  with 
other  property,  or  the  rate  must  be  set  arbitrarily  at  some  figure 
which  meets  the  general  approval  of  the  tax  payers  and  of  the 
voters  of  the  district.  Where  the  tonnage  tax  is  used  in  Canada 
it  is  practically  a  royalty  and  approximates  the  royalty  rate 
and  no  other  taxes  are  paid  by  the  mining  companies  on  prop- 
erty used  exclusively  for  mining  purposes.  In  some  provinces 
however  the  tonnage  tax  is  levied  in  addition  to  the  royalty  paid 
to  the  Crown.  In  Michigan  and  Minnesota  when  the  system 
was  used  the  tonnage  tax  rate  was  much  lower  than  the  royalty 
rate.  The  title  to  the  mineral  lands  is  in  individuals  and  corpo- 
rations in  Michigan  and  Minnesota,  while  in  Canada  the  title 
to  the  mineral  lands  upon  which  the  mines  are  operating  is  in 
the  government. 

In  the  accompanying  table  are  shown  the  tonnage  rates  in 
Michigan  and  Minnesota  when  a  tonnage  tax  was  employed, 
and  also  the  expenditure  for  taxes  per  unit  of  product  under 
the  general  property  tax. 

General  prop- 
Miehigan  Tonnage  tax         erty  tax 

Copper  mines,  per  Ib.  copper  in  1891 $.000375 

Copper  mines,  per  Ib.  copper  in  1912 $.003  to  $.006 

Iron  mines,  per  ton  in  1891 01 

Iron  mines,  per  ton  in  1909-1913 .1095 

on  coal  and  fifteen  cents  on  coke,  if  produced  from  untaxed  coal;  prev- 
ious to  1907  the  rates  were  five  and  nine  cents  respectively.  In  Alberta 
and  Saskatchewan  there  is  a  tax  or  royalty  of  five  cents  a  ton  on  coal. 
(Morine,  A.  B.  Mining  Laws  of  Canada.,  chap.  VIII.  Toronto,  1909). 


677]  COMPARISON  OF   METHODS  147 

General  prop- 
Minnesota  Tonnage  tax         erty  tax 

Iron  mines  in  1896,  per  ton _ $.01 

Iron  mines  in  1914,  per  ton $.056621 

Iron  mines  in  1914,  per  ton .2322     , 

It  has  been  suggested  that  a  graduated  tonnage  tax  be  em- 
ployed. But  the  problem  of  graduating  the  rate  would  be  in 
effect  appraising  the  product  as  is  now  done  in  a  number  of  states 
employing  the  general  property  tax. 

The  advantages  claimed  for  the  tonnage  tax  are  briefly  as 
follows : 

1.  Simplicity  of  administration  and  economy. 

2.  The  taxpayers  would  know  definitely  in  advance  what 
taxes  must  be  paid. 

3.  Only  productive    mines    and    mineral    lands  would  be 
taxed. 

4.  The  state  would  take  a  large  share  of  the  profits  secured 
from  mineral  deposits.23 

It  is  urged  that  the  system  is  not  a  good  one  because : 

1.  Volume  of  output  is  not  often  a  measure  of  ability  as 
mines  producing  a  large  tonnage  may  have  the  smallest  profit 
per  ton ;  conversely,  mines  having  a  small  output  may  have  a 
large  profit  per  ton. 

2.  A  fixed  rate  per  ton  may  make  mining  unprofitable  if 
the  market  price  of  the  mineral  product  declines. 

3.  There  is  no  tax  upon  non-producing  mines  and  mineral 
lands  held  for  speculative  purposes. 

4.  The  public  revenue  from  such  a  tax  is  uncertain  as  it 
will  vary  directly  with  the  tonnage,  which  may  change  from 
year  to  year. 

Earnings  tax.  When  a  tax  is  levied  on  earnings  it  becomes 
necessary  for  the  legislative  body  or  for  tax  officials  to  deter- 
mine what  deductions  from  the  value  of  the  output  shall  be 

21  State  taxes  only. 

"Includes  all  taxes. 

28The  Minnesota  Tax  Commission  in  1908  recommended  that  a  ton- 
nage tax  be  employed  instead  of  the  general  property  tax.  "Considera- 
tions of  justice  and  sound  fiscal  policy  make  it  desirable;  in  no  other 
feasible  way  can  the  heritage  and  the  diminishing  value  elements  involved 
be  recognized."  (First  Biennial  Report,  Minn.  Tax  Com.,  1908,  p.  224). 
By  the  "heritage  element  is  meant  the  state's  right  to  a  share  of  the  vatoe 
of  the  earth's  possessions  found  within  the  borders  of  the  state." 
P-  145). 


148  MINE  TAXATION   IN   THE   UNITED   STATES  [678 

permitted  in  calculating  the  net  earnings.  Unless  stated  other- 
wise, the  term  "earnings"  will  be  understood  to  mean  net 
earnings. 

A  number  of  the  states  employ  a  tax  on  earnings,  the  state 
laws  attempting  to  define  earnings  so  that  the  assessor  shall 
have  no  difficulty  in  verifying  the  data  filed.  In  most  of  the 
states  in  which  a  net  earnings  tax  is  used  there  has  been  consid- 
erable discussion  in  regard  to  the  deductions  which  shall  be 
allowed.  In  mine  accounting,  as  will  be  noted  later,  it  is  now 
the  customary  practice  with  some  of  the  best  companies  to 
charge  all  ordinary  development  to  operating  expenses.  The 
term  "permanent  improvement"  includes  very  little  about  a 
mine  operated  on  this  plan.  Everything  is  immediately  charged 
to  expense  unless  the  item  is  properly  one  which  represents  an 
unusual  improvement,  the  cost  of  which  may  be  distributed  over 
a  period  of  years.24 

However  the  net  earnings  tax  as  employed  in  the  several 
states  is  practically  a  general  property  tax,  for  the  mine  is  as- 
sessed at  its  net  earnings  or  the  full  amount  of  the  net  earnings 
is  arbitrarily  taken  to  be  the  actual  value  of  the  mine  and  on 
this  base  the  rate  of  the  general  property  tax  is  applied.  A 
true  net  earnings  tax  is  rather  a  tax  which  like  an  income  tax 
takes  annually  a  fixed  percentage  of  the  income  or  earnings. 
Levying  a  tax  on  net  earnings  at  the  general  property  tax  rate 

2*A  notable  example  of  this  type  of  improvement  is  the  stripping  of 
ore  in  an  open-pit  mine.  Most  of  the  "dead  expense"  is  incurred  at  the 
beginning  or  in  the  early  stages  of  the  operations.  When  the  waste 
material  overlying  the  ore-body  has  been  removed,  the  deadwork,  cor- 
responding more  or  less  to  the  sinking  of  a  shaft,  is  completed  and  every 
'ton  of  ore  subsequently  mined  should  be  charged  with  a  portion  of  this 
preliminary  expense.  In  the  case  of  several  large  open-pit  mines,  which 
are  still  stripping  waste,  the  claim  has  been  made  that  the  total  cost 
of  stripping  should  be  deducted  from  the  earnings  during  the  year 
in  which  the  stripping  is  done,  and  that  taxes  should  be  figured  on  the 
net  above  this  development  expense.  On  the  books  of  the  company 
however  this  cost  of  stripping  is  carried  as  a  suspense  account  and 
against  each  ton  of  ore  as  it  is  mined  there  is  charged  its  share  of  the 
entire  development  expense.  The  question  at  issue  seems  to  be  whether 
the  state  shall  collect  a  larger  share  now  or  defer  its  claim  until  later. 
It  is  not  a  matter  of  tax-dodging  but  rather  a  postponement  of  taxes. 
The  extent  and  the  quality  of  the  ore-body  are  assumed;  the  variables 
that  might  later  affect  the  earnings,  and  therefore  the  taxes,  are  the 
future  cost  of  mining  and  the  market  price  of  the  metal  produced. 


679]  COMPARISON   OP   METHODS  149 

is  in  effect  actually  appraising  the  mine  to  be  worth  only  one 
year's  earnings.  The  fallacy  of  this  plan  in  its  general  applica- 
tion is  evident. 

If  the  earnings  of  a  mine  are  maintained  uniform  through- 
out its  life,  the  annual  sum  of  taxes  paid  will  be  uniform,  dur- 
ing the  years  immediately  prior  to  the  exhaustion  of  the  mine 
as  well  as  in  the  first  years  of  production.  The  tax  burden 
therefore  would  be  distributed  throughout  the  life  of  the  mine. 

The  objections  to  the  net  earnings  tax  that  have  been 
presented  are  notably  as  follows : 

1.  The  difficulty  of  determining  what  deductions  shall  be 
made  from  the  gross  earnings. 

2.  The  necessity  for  more  or  less  inquisitorial  inspection  of 
the  accounts  of  the  mine. 

3.  The  fact  that  there  may  be  little  relation  between  the 
capital  paid  in  and  the  earnings  of  a  company. 

4.  Non-productive    and    unprofitable    mines    pay    no    tax 
whatever. 

5.  From  the  view  point  of  the  tax  officials,  there  is  the 
objection  that  the  state  revenue  derived  from  mines  in  this  way 
would  not  be  nearly  as  uniform  from  year  to  year  as  when  the 
general  property  tax  is  used,  unless  the  earnings  of  the  mines 
are  uniform. 

6.  The  rate  would  have  to  be  high  in  order  to  collect  from 
mines  the  same  proportion  of  the  earnings  as  is  collected  from 
real  property  under  the  general  property  tax. 

In  support  of  the  net  earnings  tax,  the  following  advan- 
tages may  be  noted : 

1.  As  a  rule,  the  taxing  unit  will  secure  more  revenue 
from  the  mines,  if  the  entire  life  of  each  mine  is  considered, 
than  if  mines  are  taxed  under  the  general  property  tax.     The 
assumption  is  made  that  under  both  systems  the  same  taxes  are 
collected  the  first  year. 

2.  If  depreciation  has  been  properly  provided  for,  and  the 
earnings  are  uniform,  the  amount  of  taxes  paid  each  year  during 
the  life  of  the  mine  will  be  uniform,  although  the  value  of  the 
mine  may  be  declining  at  a  regular  rate. 

3.  Physical  valuation  or  appraisal  is  not  necessary. 

4.  There  is  less  expense  for  administration. 

5.  Development  of  mines  is  encouraged  as  the  unprofitable 
and  unproductive  mines  are  exempt. 


150  MINE  TAXATION   IN   THE  UNITED   STATES  [680 

From  the  view  point  of  the  mine  operator,  this  system  is 
desirable  for  the  following  reason : 

6.  If  the  rate  is  maintained  uniform,  the  taxes  will  be 
heaviest  when  the  mine  is  most  profitable  and  there  will  be  no 
burden  during  the  development  period.23 

Income  tax.  As  previously  noted,  the  Federal  Government 
and  a  few  of  the  states  levy  a  tax  upon  the  income  of  individ- 
uals and  of  corporations.  The  essential  difference  between  the 
so-called  "net  earnings"  tax  and  an  income  tax  is  that  every 
state  employing  the  former  levies  the  tax  at  the  general  prop- 
erty tax  rate  thus  practically  valuing  a  mine  at  one  year's  earn- 
ings, while  under  the  income  tax  there  is  a  fixed  or  graduated 
rate  specified  which  applies  only  to  income.  As  will  be  noted 
in  Chapter  IX,  it  has  been  urged  that  mines  should  be  taxed 
upon  income  and  at  a  rate  graduated  according  to  the  earnings 
upon  paid-in  capital.  This  proposal  contemplates  also  a  definite 
consideration  of  the  deferment  of  dividends  until  after  a  mine 
is  developed. 

The  advantages  claimed  for  an  income  tax  as  applied  to 
mines  are  the  same  ones  that  apply  to  income  taxation  in  gen- 
eral, but  the  following  have  the  more  specific  application : 

1.  Income  of  mines  is  the  true  and  only  measure  of  ability. 

2.  The  administrative  problems  have  been  simplified  for 
the  states  by  the  enactment  of  the  federal  income  tax  law. 

3.  Mines  would  be  taxed  when  productive,  therefore  the 
tax  is  convenient  as  compared  with  the  general  property  tax. 

4.  There  is  no  pressure  or  inducement  tending  to  cause 
careless  and  wasteful  mining. 

5.  Exploration  and  development  are  not  impeded. 

The  objections  raised  against  an  income  tax  or  an  ad  valo- 

25The  system  of  mine  taxation  inaugurated  by  the  Province  of 
Ontario  by  the  Act  of  1007  is  a  good  example  of  the  net  profits  or  earn- 
ings tax.  "All  mines  which  yield  an  annual  profit  above  the  exempted 
amount  of  ten  thousand  dollars  pay  a  flat  rate  of  three  percent  on  such 
excess.  In  ascertaining  the  profits,  the  gross  receipts,  or  value  at  the  pit 
mouth,  are  taken  and  from  this  sum  is  deducted  the  cost  of  transporta- 
tion of  the  output  sold,  if  borne  by  the  shipper,  and  actual  working 
expenses  including  mine  wages  and  salaries,  cost  of  fuel,  explosives,  power, 
insurance,  and  sinking  new  shafts,  and  an  allowance  for  depreciation  of 
the  plant, — not  of  the  mine.  The  tax  levied  in  any  year  is  based  upon 
the  profits  of  the  preceding  year."  (Ch.  9,  /  Edw.  VII). 


681]  COMPARISON  OP   METHODS  151 

rem  tax  based  on  capitalization  of  net  income  have  been  sum- 
marized as  follows: 

"1.  American  property  taxes  are  in  general  so  high  and 
take  so  large  a  part  of  the  annual  income  that  if  converted 
into  terms  of  income  taxation  they  would  appear  excessive. 
Few  legislatures  could  be  persuaded  to  impose  an  income  tax 
on  mines  equal  to  the  share  of  the  net  income  regularly  taken 
from  farms,  railroads,  and  similar  enterprises. 

2.  The  property  tax  is  imposed  from  year  to  year  on  idle 
property  or  property  which  for  speculative  purposes  is  held  out 
of  production,  whereas  the  income  tax  applies  only  when  the 
property  is  worked. 

3.  With  the  income  tax,  uncertainty  and  possible  inad- 
equacy of  the  tax  are  likely  to  result  unless  the  minimum  output 
is  regulated  by  the  state."28 

Equated  income  tax.  Owing  to  the  difficulty  of  appraising 
annually  mines  having  a  short  life  and  those  having  little  ore 
in  sight,  it  has  been  proposed  that  typical  mines  be  appraised 
carefully  and  the  net  earnings  or  income  determined  for  the 
entire  life  of  the  mine;  that  the  ratio  between  earnings  and 
property  value  be  determined;  and  that  a  factor  be  calculated 
so  that  the  general  property  tax  rate  may  be  applied  to  earnings 
or  income  and  the  same  tax  burden  be  thereby  applied  to  prop- 
erties regularly  appraised  and  to  those  whose  income  alone  is 
known.27  This  would  mean  that  if  the  general  property  tax 
rate  is  3  percent  and  the  factor  is  determined  to  be  2.4,  then 
the  rate  applied  to  incomes  of  mines  would  be  7.2  percent. 

The  advantages  claimed  for  this,  system  of  equating  income 
with  the  value  of  property  are  as  follows: 

1.  Ease  of  administration. 

2.  Mines    are    taxed    upon    actual    and    not    prospective 
earnings. 

3.  Taxation  according  to  ability  is  approximated. 

4.  Royalties  are  taxed  at  the  source. 

5.  There  is  no  effect  on  conservation  of  mineral  resources 
and  no  penalty  on  development. 

The  disadvantages  are: 

26Report  of  the  Committee  on  Taxation  of  Mines  and  Mineral 
Lands,  Proceedings  National  Tax  Association,  1913,  VII,  390. 

27Uglow,  W.  L.  Bulletin  XLl,  Wisconsin  Geological  and  Natural 
History  Survey,  1914,  p.  59. 


152  MINE  TAXATION   IN   THE   UNITED   STATES  [682 

1.  The  system  is  based  upon  the  average  life  for  a  district 
or  for  a  group  of  mines,  and  occasionally  an  individual  mine 
may  suffer  or  may  escape  its  just  share  of  taxes. 

2.  The  revenue  derived  will  fluctuate  with  the  earnings. 

3.  Unprofitable  and  unproductive  mines    are    not    taxed. 
Unprofitable  mines  on  a  royalty  basis  are  taxed. 

4.  Land  held  for  speculative  purposes  is  not  taxed.28 

2*Ibid.,  p.  64. 


CHAPTER  VII 

PROBLEMS  OP  ADMINISTRATION 

The  administrative  problems  of  mine  taxation  differ  in  a 
number  of  points  from  those  of  taxation  of  other  kinds  of  prop- 
erty. Particular  attention  may  be  directed  to  the  problem  of 
appraisal  of  mineral  properties,  to  mine  accounting  and  depre- 
ciation of  mines,  and  to  the  cost  of  administration. 

APPRAISAL  OF  MINERAL  PROPERTIES  FOR  TAXATION.  As  most 
of  the  states  employ  the  general  property  tax  and  a  number  of 
the  others  tax  the  property  of  non-producing  mines,  the 
appraisal  of  mineral  properties  for  taxation  is  a  problem  prac- 
tically of  national  interest.  In  but  few  states,  however,  has 
the  subject  received  the  serious  attention  which  its  importance 
warrants.  This  may  be  due  to  several  causes:  (1)  The  failure  to 
develop  or  apply  a  scientific  system  of  appraisal  of  property  in 
general  throughout  most  of  the  states;  (2)  constitutional  limita- 
tions upon  the  methods  of  assessment;  and  (3)  the  opposition 
of  the  various  interests  involved. 

In  Minnesota,  Michigan,  Wisconsin,  Arizona,  Colorado, 
Nevada,  Utah,  and  Pennsylvania  considerable  attention  has  been 
given  to  the  problem  and  in  the  first  three  there  have  been 
appraisals  made  which  have  gone  a  long  way  toward  solving  the 
problem. 

In  discussing  the  appraisal  of  mineral  lands,  Mr.  H.  M. 
Chance  suggested  that  the  purpose  for  which  an  appraisal  of 
mineral  property  is  desired  will  determine  the  choice  of  method 
or  combination  of  methods  to  be  used.  Among  the  methods  which 
have  been  applied  are  the  following:1 

1.  The  value  may  be  determined  by  adding  to  the  cost  of 
the  land  the  cost  of  improvements,  and  a  reasonable  remuneration 
to  the  party  which  has  successfully  developed  the  property. 

2.  After  the  common-practice  of  real-estate  appraisers,  the 
value  may  be  determined  by  the  prices  at  which  property  of  a 

1  Chance,  H.  M.     Appraisal  of  the  value  of  mineral  lands.     Trans- 
actions of  American  Institute  of  Mining  Engineers,  1904,  XXXV,  347. 

153 


154  MINE  TAXATION   IN   THE   UNITED   STATES  [684 

similar  character  in  the  immediate  neighborhood  has  recently 
been  sold. 

3.  A  method  elaborated  by  Mr.  J.  S.  Harris  several  years 
ago  for  the  purpose  of  appraising  the  value  of  coal-lands  owned 
by  the  Philadelphia  and  Reading  Coal  and  Iron  Company  has 
been  adopted  by  many  experts  for  general  purposes.     By  this 
method  the  total  workable  coal  in  the  ground  is  first  determined 
and  valued  at  a  certain  sum  per  ton,  this  estimate  being  based 
either  upon  what  the  coal  would  produce,  if  leased  upon  a  roy- 
alty, or  upon  the  profits  of  mining  it.    Using  as  a  basis  the  rate 
of  increase  in  production,  as  shown  by  past  experience,  the  pro- 
bable yearly  increase  of  output    is    calculated,    and    for   these 
figures  the  probable  revenue  is  calculated  for  each  year  of  the 
period  during  which  the  assumed  output  can  be  maintained,  or 
until  all  the  coal  is  mined.     Then  the  probable  future  earnings 
of  the  land,  either  by  royalty  or  through  production,  are  capi- 
talized at  their  present  money  value,  by  the  usual  formulas  foi) 
deferred  payments,  at  a  certain  assumed  rate  of  discount.    The 
present  money-value  of  coal-land  depends  largely  upon  the  time 
at  which  development  is  to  be  commenced,    the    time    elapsing 
before  maximum  output  is  attained,  and  the  time  to  be  occupied 
in  exhausting  the  tract, — the  present  money-value  decreasing 
rapidly  as  any  of  these  variables  is  increased. 

4.  The  appraised  value  of  the  property  may  be  taken  as 
the  capitalized  value  of  the  yearly  earnings  which  it  is  estimated 
will  result  from  the  operation  of  the  property  at  a  certain  yearly 
output  maintained  for  a  fixed  term  of  years  at  an  average  profit 
per  ton  extending  throughout  the  whole  period,  and  not  providing- 
for  any  increased  output  beyond  what  may  be  already  in  sight. 

5.  The  value  may  be  based  upon  the  actual  net  earnings 
allowing  for  such  increases  and  improvements  as  seem  warranted 
by  industrial  conditions,  treating  the   property  as  a  business 
investment  and  worth  the  price  which  the  earnings  justify,  pro- 
vided it  be  not  greatly  in  excess  of  the  appraisal  value  of  the 
land,  plant,  and  improvements  as  reached  by  other  methods.2 

2In  commenting  on  these  methods,  Mr.  Chance  said :  "The  first  method 
may  be  dismissed  without  serious  consideration,  because  it  is  impossible 
to  determine  what  would  constitute  a  reasonable  profit  to  the  operator 
developing  a  tract  of  land,  and,  further,  because  this  method  ignores 
the  value  of  the  business  that  the  operator  has  established  and  the  enhance- 
ment of  land-values  due  to  the  development  of  the  property. 

The   second   method   is   discarded    for   similar   reasons,  also  because 


685  J  PROBLEMS  OP  ADMINISTRATION  155 

The  fifth  method  is  now  generally  employed  in  valuing 
mining  properties  by  representative  engineers.3 

In  appraising  mining  property,  other  than  improvements 
and  broken  ore  or  stored  mineral  product,  it  has  been  customary 
for  tax  officials  to  classify  the  various  kinds  of  property  as 
follows:  productive  mines,  non-productive  mines,  mineral 
reserves,  unexplored  mineral  lands,  mining  rights,  and  lease- 
holds. Many  of  the  representative  and  the  most  important 
points  in  the  appraisal  of  mineral  properties  for  the  purpose  of 
taxation  may  be  noted  in  connection  with  the  methods  of  valuing 
productive  or  developed  mines  which  methods  will  be  discussed 
first.  As  suggested  by  Mr.  Hoover,4  the  field  of  valuation  of  pro- 
ductive mineral  properties  may  well  be  treated  in  sections.  In 
the  following  discussions  an  effort  has  been  made  to  present  data 
and  methods  in  the  following  order:  (a)  copper,  lead,  zinc  and 
precious  metal  mines;  (b)  iron  mines;  (c)  coal  mines;  (d)  gold 
placers;  (e)  petroleum  and  natural  gas  wells;  and  (f)  mineral 
rights. 

it  fails  to  recognize  the  fact  that  the  price  paid  for  coal  property  is  a 
measure  only  of  the  value  placed  upon  it  by  the  vendor,  who,  if  not  in  a 
position  to  operate  it,  may  be  willing  to  part  with  it  for  much  less  than 
its  real  value.  In  buying  from  original  owners  coal  operators  rarely 
pay  full  prices,  but  almost  invariably  what  they  believe  to  be  a  small 
fractional  part  of  the  real  value. 

The  third  method  is  most  valuable  for  the  purpose  for  which  it 
is  used  by  Mr.  Harris,  namely,  as  a  basis  upon  which  reorganizations 
may  be  planned,  and  a  new  company  financed.  It  may  not  be  adapted 
for  general  use,  because  it  is  cumbersome,  and  also  because  it  does  not 
include  allowances  for  the  value  of  established  trade  and  connections. 

The  fourth  method  is  useful  in  a  majority  of  cases  as  corroborative 
of  valuations  reached  by  the  fifth  method." 

3Rickard,  T.  A.     Sampling  and  Estimation  of  Ore  in  a  Mine.    New 
York,  1904. 

Economics  of  Mining.    New  York,  1905. 
Hoover,  H.  C.    Principles  of  Mining.    New  York,  1909. 
Finlay,  J.  R.    Cost  of  Mining.    New  York,  1909. 
Burnham,  M.  H.    Modern  Mine  Valuation.    London,  1912. 
Herzig,  C.  S.    Mine  Sampling  and  Valuing.    San  Francisco,  1912. 
Eckel,  E.  C.     Iron  Ores,  Their  Occurrence,  Valuation  and  Control. 

New  York,  1914. 
4Hoover,  H.  C.    Principles  of  Mining,  p.  I. 


156  MINE  TAXATION  IN  THE  UNITED  STATES  [686 

COPPER,  LEAD,  ZINC,  AND  PRECIOUS  METAL  MINES 

It  has  been  suggested  that  both  positive  and  speculative 
factors  must  be  considered  in  determining  the  value  of  a  metal 
mine.  The  positive  value  or  character  of  the  ore  as  it  is  known 
to  exist  in  the  ground  may  be  determined  by  an  examination  and 
the  sampling  of  the  mine  and  the  metallurgical  testing  of  the 
ore.  The  quantity  of  mineral  product  actually  available  must 
be  determined  by  measurements  made  upon  the  blocks  of  ore 
exposed.  The  mining  engineer  in  making  an  examination  of  a 
mine  may  find  it  necessary  to  cut  samples  from  the  solid  ore  in 
place  every  five  or  ten  feet  along  the  exposed  faces  of  every  block 
of  ore.  This  work  of  taking  the  samples,  together  with  the  work 
of  surveying  the  mine  in  order  to  determine  the  location  of  the 
points  at  which  samples  were  taken  and  the  volume  of  blocks 
sampled,  followed  by  the  task  of  assaying  each  sample  may 
require  the  full  time  of  several  trained  men  for  many  days  and 
may  cost  several  thousand  dollars  for  each  large  mine  examined. 
It  cost  $7,000  to  sample  one  well-known  mine,  and  it  cost  $12,000 
to  do  the  same  work  in  a  neighboring  property.  This  does  not 
include  the  fee  of  the  engineer  in  either  instance.5  In  appraising 
an  operating  mine  for  taxation  it  would  usually  be  unnecessary 
for  the  mine  valuer  to  do  more  than  to  check  and  verify  the 
sampling  which  had  previously  been  done.  It  has  been  held  by 
some  opponents  of  the  ad  valorem  system  of  mine  taxation  that 
the  expense  even  of  checking  the  sampling  of  large  precious 
metal  mines  will  make  the  system  prohibitive  in  those  states  in 
which  there  are  many  mines  of  this  character. 

There  is  also  to  be  considered  the  question  of  developing, 
equipping,  and  operating  the  mine  and  this  involves  the  variable 
of  technical  skill  and  managerial  ability.  Finally,  there  are  the 
speculative  elements  of  continuity  and  character  of  the  orebody 
beyond  the  ore  visible  at  the  time  of  examination  and  the  possi- 
bility of  a  change  in  the  market  price  of  the  product  for  all 
except  gold  mines.6 

Speculative  features  have  entered  in  various  ways  into  the 
appraisal  of  mines  for  taxation.  In  some  states  it  has  been 
urged  that  the  interest  rate  used  in  valuing  a  mine  should  be 
as  high  as  the  rate  that  investors  normally  expect  to  receive 
from  mining  investments;  others  favor  the  practice  of  making 

8Rickard,  T.  A.    Sampling  and  Estimation  of  Ore  in  a  Mine,  p.  14. 
•Hoover,  Principles  of  Mining,  p.  I. 


687]  PROBLEMS  OP  ADMINISTRATION  157 

percentage  deductions  for  various  factors  of  risk7  such  as  the 
following : 

"1.     The    risk    of    continuity    in    metal    contents    beyond 
sampled  faces. 

2.  The  risk  of  continuity  in  volume  through  the  blocks  of 
ore  estimated. 

3.  The  risk  of  successful  metallurgical  treatment  (due  to 
changing  character  of  the  ore). 

4.  The  risk  of  metal  prices,  in  all  but  gold. 

5.  The  risk  of  properly  estimating  costs. 

6.  The  risk  of  the  extension  of  the  ore  beyond  exposures. 

7.  The  risk  of  management."8 

It  is  to  be  assumed  that  in  valuing  mines  for  taxation  the 
risk  factor  will  be  given  the  same  weight  as  it  is  usually  given  by 
engineers  in  appraising  mines  for  sale  or  purchase. 

The  basic  factors  in  the  valuation  of  a  mine  are  (1)  average 
market  prices  for  the  product;  (2)  average  costs  of  mining  and 
marketing  the  product;  (3)  the  life  of  the  mine,  and  (4)  the 
interest  and  discount  rate.9 

With  these  data  determined  or  given,  the  present  worth  of 
a  mine  producing  annually  a  fixed  tonnage  of  a  uniform  quality 
may  be  readily  calculated  from  the  following  formula  :10 

100  p  A (z  S  ) 


Present  value 


x   z  (z  S  +  100) 


A  =  number  of  tons  in  the  deposit;  x  =  number  of  years 
required  to  mine  this  tonnage  ;  p  =  profit  per  ton  ;  z  =  rate  of 
return  expected;  d  =  rate  -(-  1  at  which  the  sinking-fund  can 
safely  be  invested. 

d(d*-l) 

~~ 


With  certain  types  of  mines,  as  has  been  noted,  the  sampling 
and  estimation  of  the  ore-body  may  mean  a  difficult  and  expensive 
task  which  would  be  practically  out  of  the  question  for  the 
appraiser  to  undertake  annually  for  each  mine  in  the  tax  district. 

7/n/ro,  p.  191. 

8  Hoover,  op.  cit.  p.  182. 

9Finlay,  J.  R.    Cost  of  Mining,  p.  5- 

10Ibid.,  p.  16.  See  also  Hoskold,  H.  D.  Valuation  of  mines  of  definite 
average  income.  Transactions  of  American  Institute  of  Mining  Engineers, 
1902,  XXXIII,  777- 


158  MINE  TAXATION   IN   THE   UNITED   STATES  [688 

In  the  two  types  of  metal  mines,  other  than  iron,  which  have  been 
appraised  on  an  ad  valorem  basis  by  state  appraisers,  no  attempt 
has  been  made  to  sample  the  mines.  In  the  Michigan  native 
copper  mines,  sampling  would  be  impractical.  In  the  Wisconsin 
zinc  district  it  has  been  customary  to  estimate  ore  reserves  from 
platted  drill  holes,  put  down  in  exploring  the  deposit.  Exper- 
ienced mine  operators  having  the  records  of  the  holes  can  esti- 
mate very  closely  the  value  of  a  deposit  and  the  same  data  are 
available  to  the  appraiser  for  the  tax  commission.11 

The  problem  then  is  rather  one  of  verifying  the  data  avail- 
able, of  checking  tonnages,  of  verifying  sales,  prices,  and  costs, 
and  of  estimating  profits.  With  a  known  life  of  the  mine,  the 
present  worth  may  easily  be  calculated. 

In  appraising  the  short-lived  mine  or  the  mine  whose  devel- 
opment is  generally  not  sufficient  to  warrant  an  estimation  of 
life,  many  factors  must  be  considered, — and  these  can  be  esti- 
mated only  by  the  experienced  appraiser  who  is  familiar  with 
the  geology  of  the  district.12  Arizona  was  the  first  state  to 
attempt  an  appraisal  of  precious  metal  mines,  or  mines  carrying 
important  quantities  of  precious  metals  as  by-products.13 

IRON  MINES 

The  Minnesota,  the  Michigan,  and  the  Wisconsin  Tax  Com- 
missions have  had  considerable  experience  in  appraising  iron 
mines.  The  important  features  of  the  work  of  each  commission 
will  be  presented  later.14, 

The  valuation  of  iron  mines  rests  fundamentally  upon  the 
same  basal  factors  as  the  valuation  of  gold,  silver,  copper,  zinc, 
and  lead  mines, — namely,  (1)  average  costs  per  unit  of  product, 
(2)  average  prices  per  unit  of  product,  (3)  average  number  of 
units  produced  annually,  (4)  life  of  the  mine,  and  (5)  rates 
of  interest  and  discount.  The  economic  conditions  controlling 
the  iron  industry,  and  regularity  and  extent  of  iron-ore  deposits, 
and  the  wider  distribution  of  iron-ores  have  caused  many  ap- 
praisers to  consider  iron-ore  deposits  separately  from  those 
ores  which  carry  commercial  quantities  of  the  precious  metals. 

11Uglow,  W.  L.  Methods  of  mine  valuation  and  assessment.  Bulletin 
XLI,  Wisconsin  Geological  and  Natural  History  Sun'ey,  1914. 

12This  will  be  discussed  later  in  considering  the  experience  of  the 
Wisconsin  appraiser  in  the  Platteville  zinc  district. 

13/«/ro,  p.  198. 

14/n/ra,  Minnesota,  p.  175;  Michigan,  p.  194;  Wisconsin,  p.  185. 


689]  PROBLEMS  OF  ADMINISTRATION  159 

Eckel  in  discussing  the  valuation  of  iron-ore  properties  suggests1" 
that  for  such  properties  there  may  be  three  different  bases  on 
which  the  valuation  may  be  placed:  (1)  Capitalization  of  smelt- 
ing profits,  (2)  capitalization  of  royalties  or  mining  profits,  and 
(3)  market  or  replacement  valuation.  In  capitalizing  the  smelt- 
ing profits,  the  same  line  of  thought  is  followed  as  is  followed 
in  gold  mining,  namely,  that  the  treatment  and  reduction  of 
ores  is  incidental  to  mining  and  therefore  for  example,  the  profit 
of  the  reduction  of  the  gold  ores  is  simply  a  part  of  the  profits 
of  gold  mining,  defining  mining  in  a  comprehensive  way.  Simil- 
arly, iron  smelting  may  be  considered  as  a  branch  of  the  iron 
mining  business.  Logically,  iron  smelting  stands  in  the  same 
relation  to  iron  mining  as  gold  milling  does  to  gold  mining, — but 
the  trade  customs  have  been  different.  The  "method  of  valua- 
tion which  has  been  here  suggested16  is  clearly  justifiable,  "  but 
has  not  been  adopted  in  the  past." 

In  summarizing  the  problems  of  iron-ore  property  valuation, 
Eckel  emphasizes18  the  importance  of  finding  a  market  for  the 
iron-ore  of  the  particular  chemical  composition  of  the  deposit  to 
be  valued.  In  a  going  concern  the  appraiser  would  have  avail- 
able the  accounts  of  the  company  showing  the  actual  prices 
received  for  ores  and  could  estimate  the  value  of  the  deposit  or 
blocks  of  the  deposit  upon  these  records  of  sales.19 

The  interest  and  discount  rate  is  of  importance  particularly 
in  valuing  deposits  of  iron  ore  or  other  minerals  of  such  extent 
that  the  mines  operating  upon  them  will  have  a  comparatively 
long  life.  It  has  been  suggested  that  some  mines  may  have  too 
much  "ore  in  sight."  This  statement  may  apply  to  either  of 
two  conditions.  The  company  may  have  bought  lands  or  mineral 
rights  in  order  to  secure  assured  reserves,  and  the  price  paid  for 
these  reserves  may  at  compound  interest  amount  to  so  great  a  sum 
that  by  the  time  the  ore  is  mined,  no  profit  will  result  from  the 
investment.  Or,  the  company,  upon  lands  previously  owned,  may 

18Eckel,  E.  C    Iron  Ores.    The  basal  factors  in  ore  valuation,  p.  109. 

18 1 bid.,  p.  no. 

17It  is  interesting  to  note  the  complications  that  such  a  system  of 
valuation  might  provoke  if  the  State  of  Minnesota  should  attempt  to  tax 
iron-ore  on  the  basis  of  the  profits  earned  by  the  iron  and  steel  plants 
located  at  Pittsburgh. 

16Ibid.,  p.  113. 

19The  question  of  composition  of  ores,  marketibility,  etc.,  is  of  import- 
ance, however,  in  determining  the  prospective  value  of  unproductive 
mines  and  mineral  lands  containing  known  tonnages  of  sampled  ore. 


160  MINE  TAXATION   IN   THE   UNITED   STATES  [690 

make  expenditures  for  driving  development  openings  and  there- 
by may  open  additional  reserves ;  but  the  expenditure  upon  these 
new  openings,  when  considered  as  an  investment  and  charged 
with  interest  compounded,  may  amount  to  so  great  a  sum  by  the 
time  the  ore  is  mined  that  no  profit  may  result.  It  is  evident 
therefore  that  the  interest  and  discount  rates  arid  the  carrying 
charge  are  important  in  estimating  the  present  worth  of  extensive 
mineral  deposits. 

The  determination  of  the  carrying  charge  upon  ore  or  other 
mineral  in  the  ground  has  aroused  much  discussion  particularly 
in  the  iron-mining  and  the  coal-mining  states.  "The  selling 
value  of  a  natural  agent — be  it  agricultural,  an  urban  site,  a 
developed  mine — is  a  capitalization,  at  the  current  rate  of  inter- 
est, of  the  fixed  income  which  accrues  to  its  owner.  It  varies, 
therefore,  inversely  to  the  rate  of  interest."20  In  the  Finlay 
appraisal  of  the  iron  mines  of  Michigan  the  rates  used  were 
six  percent  on  the  investment  and  four  percent  on  the  sinking- 
fund.  In  the  so-called  Hill  ore  lease  four  percent  was  taken  as 
a  basis  for  calculation.  ' '  Taking  everything  into  consideration,  it 
does  not  seem  justifiable,  in  considering  long-time  ore  calcula- 
tions, to  assume  a  carrying  rate  of  less  than  six  percent.  It  does 
not  seem  probable  that  under  any  ordinary  conditions  in  the 
American  money  market,  any  steel  company  whatever  could 
secure  money  at  a  lower  rate  if  ore  reserves  were  the  only  security 
offered.21  All  things  considered,  we  are  not  likely  to  under-esti- 
mate  the  matter  much  by  assuming  six  percent  as  the  minimum 
carrying  charge  or  discount  rate.  Even  at  this  rate  the  discount- 
ing effect  is  more  than  might  casually  be  expected.  If  ore  is 
being  mined  on  a  royalty  basis  of  twenty-five  cents  per  ton,  the 
royalties  for  the  tenth  year  of  the  lease  can  be  given  a  present 
value  of  only  fourteen  cents  per  ton ;  while  those  to  be  earned 
in  the  fortieth  year  have  a  value  now  of  only  two  and  one-half 
cents  a  ton.  In  other  words,  a  property  which  can  not  be  worked 
out  in  forty  or  fifty  years  does  not  derive  much  additional  present 
value  from  the  ore  still  in  the  ground  at  the  end  of  that  time. ' '" 

In  commenting  upon  the  method  of  valuation  of  iron  mines 
used  by  Mr.  J.  R.  Finlay,  the  importance  of  the  assumption  of 
the  interest  and  discount  rate  was  discussed  at  length  by  Mr. 

20Taussig,  Principles  of  Economics,  II,  97. 

21In  1907  the  Spanish-American  Iron  Company  attempted  to  make  a 
loan  by  a  series  of  6  percent  bonds,  secured  by  Cuban  iron-ore  deposits. 
These  bonds  were  sold  at  98  1/2.  Eckel,  o(>.  dt.,  p.  177. 

"Ibid.,  p.  177- 


691]  PROBLEMS  OF  ADMINISTRATION 

E.  E.  White.23  He  cited  various  authorities  to  show  that  in 
addition  to  a  fund  for  the  redemption  of  capital,  the  conserva- 
tive investor  generally  expects  a  return  of  not  less  than  ten  per- 
cent upon  mining  investments.  He  suggested  that  Mr.  Finlay's 
method  of  valuing  the  Lake  Superior  iron  mines  might  be  suc- 
cessfully used  if  the  five  factors  should  be  determined  as  follows : 
"1.  The  average  cost  of  production  at  lower  ports  for  five 
years,  plus  or  minus  the  difference  in  cost  per  ton  of  taxes  due  to 
such  revaluation. 

2.  The  estimated  ore  reserves ;  ore  based  on  diamond  drill- 
ing to  be  estimated  very  conservatively. 

3.  The  average  production  per  year  for  the  last  five  years, 
if  the  mine  has  been  equipped  to  produce  actively  for  that  length 
of  time ;  otherwise,  for  the  number  of  years  during  which  it  has 
been  so  equipped. 

4.  The  average  selling  price  at  lower  lake  ports  for  18 
years. 

5.  The  present  value  of  a  $1  per  year  dividend  based  upon 
a  10  percent  return  on  the  investment  and  capital  returned  in 
ten  years  of  operation  by  investment  of  an  annual  sum  at  3 
percent.    This  would  mean  12  to  15  years  from  the  beginning  of 
development  before  capital  would  be  replaced." 

COAL    MINES    AND    LANDS 

The  valuation  of  coal  mines  has  received  much  attention  from 
mining  engineers,  but  the  appraisal  of  coal  mines  for  the  pur- 
pose of  taxation  has  not  received  the  attention  of  taxing  officials 
to  the  same  extent  that  metal  mines  have  in  the  Lake  Superior 
region.  However,  the  coal  mines  of  Michigan  were  appraised 
for  taxation  in  1911  and  the  assessment  of  anthracite  mines  in 
Pennsylvania  and  of  bituminous  coal  mines  in  Virginia  and  West 
Virginia  has  provoked  much  discussion  and  some  litigation.  In 
most  of  these  coal  mining  districts  the  problem  of  coal  mine 
valuation  has  been  almost  inseparably  identified  with  the  valua- 
tion of  lands  and  leaseholds. 

A  survey  of  the  field  of  valuation  as  applied  to  coal  lands 
has  been  made  by  the  United  States  Geological  Survey  in  con- 
nection with  the  examination  and  classification  of  the  mineral 
lands  of  the  public  domain.  The  Geological  Survey  investigated 
the  royalty  value,  the  sale  price,  the  bonding  value,  and  the 

^Transactions    of   American   Institute    of    Mining    Engineers,    1913, 
XLV.  304. 


162 


MINE  TAXATION  IN  THE  UNITED  STATES 


[692 


TABLE  No.  2. 

ASSESSMENT   VALUE   OF  COAL  LANDS   PER   ACRE. 
EASTERN  COAL   FIELDS. 


Location 

Range  of 
assessments 

Ratio  as- 
sessed to 
assumed 
value 

Assumed 
value 

Pennsylvania: 
Luzerne  County  

$8,000 

8-10 

$10,000 

Clearfield  County  

2-  SO 

y* 

8-2OO 

Cambria  County 

IO-SO 

\4 

•io-mo 

Fayftttft  Cnji-nty 

400-600 

Westmoreland  County  

4.^0-680 

Ohio: 
Belmont  County.  

6-^0 

West  Virginia: 
Kanawha  County  

20-100 

1A 

60-300 

Raleigh  County.  

200 

McDowell  County  

250 

Kentucky: 
Henderson  County  

IO-I2 

Tennessee: 
Caliborne  County  

25-4.0 

65-100 

Alabama: 
St.  Clair  County.  

r-6 

Indiana: 
Sullivan  County  

IS 

2O-IIO 

Greene  County  

15-35 

Warrick  County 

5-6 

Illinois: 
Grundy  County  

14-37 

1A 

40-110 

Bureau  County...  

16 

St.  Clair  County  

25-50 

Franklin  County  ^ 

IS-^S 

25-5O 

693] 


PROBLEMS  OP  ADMINISTRATION 


163 


TABLE  No.  2 — Continued. 

WESTERN  COAL   FIELDS. 


Ratio  as- 

Average 

Range  of 

sessed  to 

Assumed 

Location 

assessments 

assessments 

assumed 

value 

value 

Colorado: 

Boulder  Co._  

$68.00 

1A 

$204 

Delta  Co.-  

20.00 

$20-50 

u 

60-150 

El  Paso  Co  

Si.  66 

u 

ICC 

Fremont  Co 

2Q.4.6 

10-40 

K 

to-  i  20 

Garfield  Co.—  

37-40 

10-50 

K 

30-150 

Gunnison  Co.._  

33-oo 

15-80 

H 

45-210 

Huerfano  Co. 

28.00 

2-7O 

K 

6-2  1  0 

Las  Animas  Co.  

I3-50 

5-75 

1A 

10-150 

Mesa  Co  '.  .  .. 

20.00 

\t 

60 

Pitkin  Co. 

1  6.^4. 

A.  CQ-  tO 

K 

I-i.cn-QO 

Weld  Co  

25.Q7 

Utah: 

Emery  Co._ 

IO 

25 

assessed  value  of  coal  lands  in  the  United  States  in  1910."  It 
was  found  that  county  assessors  commonly  assess  only  developed 
coal  lands  and  these  upon  the  coal  actually  being  worked.  Where 
the  coal  land  is  most  valuable  the  method  of  assessment  has 
usually  been  worked  out  with  much  care. 

Table  No.  2  gives  data  from  selected  points,  including  the 
range  of  assessment  of  coal  in  developed  properties  (exclusive 
of  improvements)  down  to  assessments  on  undeveloped  lands  off 
railroads  and  of  small  or  unknown  value,  the  ratio  between  the 
assessed  and  the  assumed  real  value,  and  the  assumed  real  value 
as  estimated  from  the  assessments.25 

In  1914,  Mr.  H.  M.  Chance  collected  data26  upon  the  county 
assessments  of  coal  lands  in  the  leading  coal  mining  states  as 
shown  in  Table  No.  3. 

"Ashley,  G.  A.  The  valuation  of  public  coal  lands.  Bulletin  424, 
United  States  Geological  Survey,  1910. 

•slbid.,  p.  33. 

26Chance,  H.  M.  Appraisal  of  coal  land  for  taxation.  Bulletin, 
American  Institute  of  Mining  Engineers,  July,  1914,  No.  91,  p.  1466. 


164 


MINE   TAXATION   IN   THE   UNITED   STATES 


[694 


TABLE  No.  3. 

COUNTY   ASSESSMENTS   OF  COAL   LANDS. 


State 

Highest  assessed 
value  of  coal, 
not  including 
surface,  per  acre 

Lowest  assessed 
value  of  coal, 
not  including 
surface,  per  acre 

Alabama.  

"Supposed  to  be  assessed 

Arkansas  

at  60  percent  but  rarely 
is  assessed  at  more  than 
25  percent  of  value." 
"Supposed  to  be  assessed 

$  i.oo  to  $40.00 

$     .12  to  $  3.00 

Colorado.-  
Illinois 

at  50  percent,  or  less,  of 
value  at  voluntary  sale." 
"Depends  on  accessibil- 
ity to  railroads." 
"Usually  at  about  20  per- 

5.00 
60.00 

2.50 
25.00 

Iowa  

cent    of    voluntary    sale 
value." 
"Undeveloped  lands  not 

75.00 

2.OO 

TCansas 

assessed  as  coal  lands." 
"Supposed   to  be  at  its 

10.00  to    30.00 

6.00  to    25.00 

Kentucky  
Ohio  

market  value." 
"Assessors    often    adopt 
statement  of  owners  as  to 
value."   (Data  not  com- 
plete). 
"Attempt  to  approximate 

20.00  to    60.00 

2.OO  to     I5.OO 

5.00  to    10.00 
i.oo  to      4.00 

Pennsylvania 

Tennessee  
Utah  

value."       "More    guess- 
work than  anything  else." 
"Actual   values   tried  to 
be  ascertained." 
Methods  vary  greatly. 
(Bituminous  region  only). 
Data  incomplete 
Data  incomplete. 

20.00  to    80.00 

10.00  to  900.00 
20.00 
20.00 

10.00  to    20.00 
5.00  to    50.00 

3.00 

IO.OO 

Virginia 

At  fair  market  value  as 

W.  Virginia.... 
Wyoming  

per  Act  of  March  7,  1912. 
"Supposed  to  be  at  vol- 
untary sale  value." 
"On   net   value   of   out- 
put." (Data  incomplete). 

100.00  to  500.00 
6.00  to  180.00 

20.00  to     30.00 

i.oo  to      8.00 
3.00  to    15.00 

20.00 

695]  PROBLEMS  OF  ADMINISTRATION  165 

The  investigation  made  by  Mr.  Chance  discloses  the  fact  that 
few  of  the  states  have  adopted  uniform  methods  applying  to  all 
parts  of  the  state.  In  general,  four  methods  of  assessment  of 
coal  lands  have  been  attempted  or  suggested.27 

First:     Valuations  based  on  actual  sales. 

Second :  Valuations  based  on  foot-acres  of  coal  remaining  in 
the  ground  or  remaining  available. 

Third :    Valuations  based  on  royalty  values. 

Fourth :    Valuations  based  on  capitalized  estimated  profits.28 

The  application  of  these  methods  in  Pennsylvania  will  be 
considered  later.29 

In  discussing  these  methods  in  a  general  way,  Mr.  Morris 
concludes  that  "none  of  the  suggested  or  attempted  methods  has 
resulted,  or  can  result,  in  an  equitable  valuation,  fair  and  just 
to  both  the  public  and  the  owners  of  coal  land."30  On  the  other 
hand,  Mr.  Chance  in  appraising  the  coal  mines  of  Michigan  for 
taxation  in  1911  used  as  a  "logical  method"  the  following  pro- 
cedure: The  present  value  of  the  proved  and  developed  coal 
tonnage  was  determined,  using  as  a  basis  an  assumed  present 
money  value  of  a  ton  of  coal  in  the  ground  existing  under 
average  mining  conditions.  The  present  value  of  undeveloped 
coal  was  assumed  to  be  a  definite  percentage  of  the  present  value 
of  developed  coal.  Various  factors  were  adopted  by  which  the 
assumed  base  was  reduced  in  order  to  allow  for  local  irregulari- 
ties, risks,  etc.  A  valuation  for  a  property  was  thus  determined, 
it  being  practically  a  capitalization  of  estimated  profits  during 
the  life  of  the  mine. 

As  previously  noted  the  United  States  Geological  Survey 
has  placed  a  valuation  upon  the  coal  lands  of  the  public  domain.81 
Various  factors  have  been  considered  and  definite  rules  have 
been  formulated  from  which  may  be  determined  the  price  to  be 
charged  for  lands  containing  coal  of  a  certain  quality  and  thick- 
ness. Deductions  are  allowed  according  to  the  variations  in 

27Norris,  R.  V.  Appraisal  of  coal  land  for  taxation.  Bulletin, 
American  Institute  of  Mining  Engineers,  April,  1915,  No.  100,  p.  868. 

28These  same  methods  have  been  used  in  principle  at  least  in  some 
of  the  metal  mining  districts. 

29Infra,  p.  204. 

*°BulIetin,  American  Institute  of  Mining  Engineers,  No.  100,  p.  873. 
See  also  the  paper  by  Mr.  Norris  on  "The  valuation  of  anthracite  mines", 
presented  at  the  International  Engineering  Congress,  San  Francisco,  1915. 

"Bulletin  537.     United  States  Geological  Survey,  1913,  p.  96. 


166  MINE  TAXATION   IN   THE   UNITED   STATES  [696 

thickness,  inclination  of  bed,  depth  below  the  surface,  and  prox- 
imity to  railroads.82 

' '  In  certain  counties  in  western  Pennsylvania,  a  fixed  value 
of  coal  land  for  a  certain  location  is  placed  upon  a  certain 
amount  of  coal  land  in  connection  with  a  going  operation,  and  all 
acreage  in  excess  of  this  fixed  amount,  which  is  called  operating 
coal,  is  assessed  at  a  lower  value,  usually  about  one-half  to  three- 
fourths  of  the  value  attached  to  the  operating  coal,  and  each 
year  the  amount  of  coal  actually  mined  during  the  year  is  de- 
ducted from  the  cheaper  or  back  coal."320 

GOLD  PLACERS 

Only  a  few  states  have  important  placer  deposits  and  little 
literature  is  available  to  show  the  actual  methods  employed  by 
assessors  in  appraising  mines  operating  upon  such  deposits.  The 

32In  addition  to  the  citations  previously  made  other  important  refer- 
ences upon  this  phase  of  valuation  of  mineral  properties  are  as  follows : 

Ashley,   G.   H.     Public  coal  lands  and  taxation.     Coal  Age,  1913, 

rv,  783. 

Chance,  H.  M.     Appraisement  of  Michigan  coal  lands.     Coal  Age, 

1912,  II,  13,  51. 
Coulthard,  R.  W.     Principle  of  coal  evaluation.    Colliery  Engineer, 

1915,  XXXVI,  22. 
Crane,  W.  R.     Coal-land  valuation  as  a  basis  for  taxation.     Coal 

Age,  1914,  V,  1055. 
Fohl,   W.   E.     Valuation   of   coal  lands.     Colliery  Engineer,   1915, 

XXXVI,  64-66. 
Griffith,   W.     Assessing  and  taxing  coal  in   the  ground.     Colliery 

Engineer,  1913,  XXXIII,  669. 
Hoskold,    H.   D.     Notes    upon   redemption   of    capital   invested   in 

collieries.       Transactions     Federated     Institution     of     Mining 

Engineers,  1891,  III,  735. 
Humphreys-Davies.    Colliery  assessments  and  the  rating  of  mining 

machinery.    Ibid.,  1891,  III,  773. 

Report  of  Coal  Tax  Commission,  Northumberland  County,  Pennsyl- 
vania, 1909. 
Smith,  A.     The  rating  of  coal  mines.     Transactions  Institution  of 

Mining  Engineers,  1899-1900,  XVIII,  171,  228. 
Smith,   J.    B.     On   colliery   depreciation.      Transactions  Federated 

Institution  of  Mining  Engineers,  1890,  II,  211. 

Taylor,  S.  A.     Valuation  of  coal  lands.     Paper  before  the  Inter- 
national  Engineering  Congress.     Coal  Trade  Bulletin,  Oct   I, 

IQIS,  P-  30. 

»*«Taylor,  S.  A.     Valuation  of  coal  lands.     American  Coal  Journal, 
October  16,  1915. 


697]  PROBLEMS  OF  ADMINISTRATION  167 

methods  of  valuing  alluvial  gold  deposits  employed  by  mining 
engineers  have  been  described  in  various  works  upon  gold 
dredging  and  placer  mining  and  in  numerous  articles  in  the 
technical  press.38 

The  valuation  of  gold  placers  that  have  been  drilled  thor- 
oughly may  be  made  upon  the  same  basis  as  the  valuation  of 
other  types  of  mineral  properties,  notably  by  determining  the 
present  value  of  the  profits  which  may  be  expected  from  work- 
ing the  deposit.  Experienced  operators  have  had  opportunity  to 
compare  the  recovery  of  gold  with  the  reports  of  drillers  and 
various  factors  have  been  determined  for  different  kinds  of 
dredging  ground,  as,  for  example,  one  factor  for  compact  gravel, 
and  others  for  medium  gravel,  for  loose  gravel,  and  for  loose 
gravel  and  sand  with  much  water.  Factors  may  be  applied  for 
the  gross  amount  of  gold  recoverable  under  general  working  con- 
ditions, although  many  of  the  largest  operators  report  that  it  is 
impossible  to  give  any  fixed  percentage  to  offset  the  various 
conditions  of  operation.34  "The  life  of  dredging  propositions 
differs  from  that  of  vein  mines  in  that  dredging  propositions  can 
be  closely  figured,  and,  unlike  the  latter  industry  where  the  profit 
in  sight  is  figured  as  a  guarantee  for  the  return  of  only  a  part  of 
the  capital  invested,  the  redemption  of  the  cast  of  the  property 
and  equipment  must  be  allowed  for  during  the  life  in  sight,  which 
is  usually  determined  by  having  the  dredge  equipment  of  suf- 
ficient capacity  to  turn  over  the  ground  in  ten  years,  as  the  life 
of  a  dredge  with  a  wooden  hull  is  generally  figured  at  this  length 
of  time."35  The  rate  of  interest,  after  proper  allowance  for  the 

83Aubury,  Lewis  E.  Gold  dredging  in  California.     Bulletin  36,  1908; 
Bull.  57,  1910,  California  State  Mining  Bureau. 

Earl,  T.  C.    Gold  Dredging.    London,  1913. 

Hodgson,  J.  E.    The  Dredging  of  Gold  Placers.    London,  1911. 

Purington,  C.  W.    The  sampling  of  placer  deposits,  in  Herzig,  C.  S. 
Mine  Sampling  and  Valuing.     San  Francisco,  1914. 

Weatherbee,  D.    Dredging  Gold  in  California.    San  Francisco,  1907. 

Decoto,  L.  A.    Valuation  of  dredging  ground.    Mining  and  Scientific 
Press,  1914,  CVIII,  773- 

Graves,  T.  A.    Examination  of  placer  ground.    Ibid.,  1914,  CIX,  991. 

Herrick,  H.  N.    Valuing  dredging  ground.    Ibid.,  1913,  CVII,  1061. 

Herzig,  C.  S.    Valuing  of  dredging  ground.    Ibid.,  1914,  CIX,  563. 

Jennings,  R.  C.    Valuing  placer  ground.     Ibid.,  1914,  CIX,  845. 

Steel,  D.    Valuing  placer  ground.    Ibid.,  1914.  CIX,  845. 
8«Bulletin  57,  California  State  Mining  Bureau,  p.  36. 
**Ibid.,  p.  36. 


168  MINE  TAXATION    IN   THE   UNITED   STATES  [698 

sinking-fund  has  been  made,  is  generally  taken  at  a  minimum  of 
ten  percent. 

In  California  mines  are  appraised  on  an  ad  valorem  basis. 

PETROLEUM     AND    NATURAL    GAS    WELLS 

The  appraisal  of  oil  and  gas  wells  has  offered  many  difficul- 
ties to  assessors  in  the  states  appraising  and  taxing  mineral 
properties  upon  an  ad  valorem  basis. 

The  important  oil  producing  states  in  1912  and  1913  were 
Oklahoma,  California,  Illinois,  West  Virginia,  Pennsylvania, 
Ohio,  Texas,  Louisiana,  and  Indiana.  The  states  leading  in  the 
production  of  natural  gas  were  West  Virginia,  Pennsylvania, 
Ohio,  Oklahoma,  Kansas,  Louisiana,  and  California.  With  the 
exception  of  Oklahoma  all  of  these  states  tax  mines  and  oil  and 
gas  wells  under  the  general  property  tax.  Except  for  the  reports 
published  by  the  Tax  Commission  of  West  Virginia  there  are 
available  but  few  data  upon  the  experience  of  the  officers  of  oil 
and  gas  states  in  taxing  oil  and  gas  wells.  The  logical  and  prac- 
tically the  only  method  of  valuing  an  oil  and  gas  well  or  property 
is  upon  production  and  profits.  Definite  instructions  on  valua- 
tion of  oil  wells  are  given  to  the  local  assessors  in  but  ten  states. 

It  has  been  said  that  few  of  the  oil-producers  appreciate 
what  the  real  cost  of  production  is.36  Obviously,  it  is  essential 
that  producers  should  know  what  is  really  income  if  property  is 
to  be  appraised  on  the  basis  of  earnings  and  if  Federal  taxes  are 
to  be  collected  on  income.380 

In  discussing  "depreciation  as  applied  to  oil  properties," 
Mr.  P.  W.  Henry  has  presented  valuable  data  on  the  cost  of 
production  and  has  demonstrated  what  items  may  properly  be 
taken  into  account  in  estimating  the  depreciation  of  oil  prop- 
erties.37 

Data  used  in  the  study  of  the  subject  were  based  upon 
estimates  of  the  United  States  Geological  Survey  for  the  State 
of  California  as  a  whole.  Considering  the  constant  annual  in- 
crease in  production  and  the  danger  from  water  intrusion,  it 
seemed  prudent  to  adopt  a  life  of  25  years  for  the  field.  A 

z*Requa,  M.  I.  Present  conditions  in  the  California  oil-fields.  Trans- 
actions of  American  Institute  of  Mining  Engineers,  1911,  XLIII,  841. 

36»As  noted  in  Chapters  III  and  IV,  Louisiana  imposes  a  license  tax 
upon  the  business  of  mining.  The  tax  is  based  upon  the  gross  value  of 
the  product  of  wells  and  mines. 

"Henry,  P.  W.  Depreciation  as  applied  to  oil  properties.  Bulletin, 
American  Institute  of  Mining  Engineers,  1915,  No.  97,  p.  31. 


699]  PROBLEMS  OP  ADMINISTRATION  169 

depreciation  rate  of  4  percent  per  annum  was  used  for  the  oil 
lands.  For  individual  wells  the  life  may  be  shorter  and  the 
rate  would  necessarily  be  correspondingly  higher.  An  average 
life  of  all  wells  drilled,  including  dry  wells,  is  suggested  as  10 
years.  In  case  the  land  should  be  valuable  for  other  purposes 
after  the  oil  has  been  exhausted,  a  depreciation  rate  correspond- 
ing to  the  actual  depreciation  due  to  the  exhausting  of  the  oil 
should  be  used.  The  depreciation  rate  on  equipment  is  figured 
at  7  percent.  Summing  up  the  depreciation  charges  which  were 
calculated  for  particular  operations,  Mr.  Henry  concludes  that 
the  following  charges  are  appropriate: 

Per  barrel 

Depreciation  of  oil  lands  (royalty) $0.555  to  $0.110 

Depreciation  on  field  equipment 0.029  to    0.052 

Depreciation  on  wells  and  appurtenances...  0.052  to    0.071 


Total  depreciation  $0.136  to  $0.233 

These  figures  were  presented  with  the  idea,  not  of  supplying 
absolute  data  that  could  be  applied  in  general,  but  rather  in 
order  to  show  what  effect  a  "proper  charge  for  depreciation  has 
upon  the  cost  of  producing  oil  in  a  state  where,  during  the  past 
few  years,  prices  at  the  well  have  ranged  from  $.30  to  $.85  per 
barrel."38 

In  addition  to  this  charge  for  depreciation,  allowance  must 
also  be  made  for  renewals  and  repairs.  The  acutal  cost  of  Cali- 
fornia oil  is  shown  by  the  following  statement : 

Per  barrel 

Pumping  $0.04  to  $0.05 

Miscellaneous  field  expense  0.04  to    0.06 

Repairs  and  renewals 0.04  to   0.05 

General  expense  0.02  to   0.04 


Total  direct  cost $0.14  to  $0.20 

Depreciation  as  above  .- -  0.14  to    0.23 


Total  cost39 $0.28  to  $0.43 

™Ibid.,  p.  28. 

89The  foregoing  data  have  been  introduced  in  order  to  give  a  basis 
for  comparison  with  other  fields.  It  should  be  noted  particularly  that 
these  data  are  based  on  a  4  percent  rate  of  depreciation  for  oil  lands, 
7  percent  for  equipment,  and  10  percent  on  the  cost  of  individual  wells 
and  appurtenances. 


170  MINE  TAXATION   IN   THE  UNITED   STATES  [700 

Mr.  William  Forstner  in  discussing  the  valuation  of  oil 
lands40  divides  oil  properties  into  eight  classes  as  follows: 

1.  Properties   with   producing  wells   and   surrounded   by 
producing  properties. 

2.  Properties  surrounded  by  producing  properties,  but  not 
developed. 

3.  Properties  with  producing  wells,  but  only  partly  sur- 
rounded by  producing  territory. 

4.  Properties  partly  surrounded   by   producing   territory, 
and  undeveloped. 

5.  Properties  with  producing  wells,  but  at  a  short  distance 
from  other  producing  territory. 

6.  Properties  at  a  short  distance  from  producing  territory, 
but  undeveloped. 

7.  Properties  with  producing  wells,  but  at  a  great  distance 
from  other  producing  territory. 

8.  Properties   at   a   great   distance  from  other  producing 
territory  and  undeveloped. 

In  the  opinion  of  Mr.  Forstner,  the  yearly  returns  of  Cali- 
fornia properties  in  the  several  classes  should  be  at  the  following 
rates : 

Class  1,  16  to  25  percent ;  Class  2,  23  to  28  percent ;  Class  3, 
18  to  27  percent ;  Class  4,  24  to  33y2  percent ;  Class  5,  24y2  to 
33  percent ;  Class  6,  30  to  42  percent ;  Class  7,  31  to  40^  percent ; 
Class  8,  no  estimate  made  as  the  property  can  not  be  valued. 

Data  on  the  Illinois  field  have  been  collected  by  Mr.  R.  S. 
Blatchley.41  The  cost  of  drilling  wells42  and  of  operating  leases43 
furnishes  a  basis  for  valuation  of  Illinois  oil  properties.  The 
cost  of  operating  the  lease  is  almost  negligible  when  considered 
in  connection  with  the  earning  power  of  the  wells.  In  some  of 
the  counties  the  operating  profits  have  been  low,  while  the  Clark 
county  fields  ' '  have  been  among  the  most  profitable  in  the  world 
because  of  the  low  cost  of  development  and  the  high  returns. 
The  essential  feature  in  operating  is  to  overcome  first  cost  and 
the  interest  on  the  investment.  In  the  shallow  fields  eight  wells 
steadily  making  two  and  even  one  barrel  per  day  are  found  to 
be  profitable."44  Statistics  are  given  to  show  that  the  profits 

*°Mining  and  Scientific  Press,  1911,  CHI,  578. 

41Blatchley,  R.  S.    The  oil  fields  of  Crawford  and  Lawrence  counties. 
Bulletin  22,  Illinois  Geological  Survey,  1913. 
4-Ibid.,  pp.  153,  160. 
43Ibid.,  p.  161. 
"Ibid.,  p.  161. 


701]  PROBLEMS  OP  ADMINISTRATION  171 

resulting  to  one  company  operating  100  wells  will  give  an  aver- 
age net  income  of  $3,000  per  month.  The  valuation  of  producing 
wells  is  considered  on  a  strictly  commercial  and  conservative 
basis.  Purchasing  companies  gauge  the  output  of  a  well  for  ten 
days  and  determine  the  average  daily  yield.  The  price  per 
barrel  for  a  producing  lease  is  from  $400  to  $500.  A  40-acre 
lease  producing  500  barrels  per  day  would  sell  at  approximately 
$200,000  and  with  a  reasonable  decline  in  production  should  pay 
for  itself  in  about  three  years.45  The  total  yield  per  acre  of  oil 
fields  varies  widely  ;  some  have  produced  only  500  barrels  or  less 
per  acre  while  others  have  produced  from  10,000  to  50,000  bar- 
rels.46 The  reports  do  not  indicate  what  amounts  may  properly 
be  charged  off  to  depreciation. 

In  West  Virginia  the  appraisal  of  oil  wells  is  made  by  the 
local  assessors  acting  under  instructions  from  the  State  Tax 
Commissioner.  '  '  The  royalty  interest  in  a  well-settled  producing 
well  is  worth  in  the  market  for  commercial  purposes  $1250  for 
each  barrel  of  oil  produced  every  24  hours;  while  the  working 
interest  is  worth  $1000  for  each  barrel  produced  in  24  hours."47 

From  the  foregoing  it  is  evident  that  oil  properties  are 
bought  and  sold  on  the  basis  of  production  and  it  seems  logical 
to  presume  that  oil  properties  can  be  appraised  on  much  the 
same  basis. 

MINERAL  RIGHTS 

The  subject  of  mineral  rights  has  been  discussed  at  some 
length  under  several  of  the  foregoing  headings,  but  it  may  be 
well  to  review  in  general  the  experience  of  the  states  and  to 
note  the  present  tendencies  in  valuing  this  type  of  property. 
In  general  the  coal-mining  right,  when  not  owned  by  the  owner 
of  the  surface,  is  assessed  as  the  property  of  the  individual  or 
corporation  claiming  ownership.  In  a  number  of  the  states  ex- 
ceptions to  this  rule  are  made  when  there  is  no  definite  knowledge 
of  the  quantity  and  quality  of  the  coal.  In  several  of  the  ore 
mining  states  laws  have  been  enacted  which  prescribe  that 
mineral  rights  shall  be  taxed  to  the  owner. 


p.  162. 

*aAccording  to  the  U.  S.  Census  Reports,  1910,  Vol.  XI,  the  oil  fields 
of  Illinois  had  a  surplus  above  operating  expenses  amounting  to  $5,491,869 
in  1909.  Out  of  this  surplus  taxes  amounting  to  $72,107  were  paid,  or  1.32 
percent  of  the  surplus. 

"Instructions  to  Assessors,  1910,  West  Virginia,  pp.  8,  15,  16. 


172  MINE  TAXATION   IN  THE  UNITED   STATES  [702 

In  many  instances  the  mineral  rights  of  unexplored  lands 
have  been  reserved  when  the  surface  has  been  sold.  When  Mr. 
Finlay  appraised  the  mining  property  in  Michigan  he  made  the 
statement  that  no  means  were  found  for  placing  a  value  on 
unexplored  iron  ore  formation.  "If  we  could  compare  an  area 
of  fresh  iron  lands  with  another  area  that  had  been  explored 
and  had  proved  to  contain  a  certain  tonnage  of  iron  ore,  we 
might  then  rationally  assume  that  the  undeveloped  land  would 
reduce  somewhat  in  the  same  proportion,  but  it  has  been  impos- 
sible to  make  any  such  comparison."48 

Professor  A.  C.  Lane  in  discussing  the  valuation  of  mineral 
rights  points  out  that  there  is  a  demand  for  mineral  rights,  that 
they  are  bought  and  sold,  and  that  they  can  be  appraised  on 
this  basis.  He  discussed  the  proplem  carefully  for  the  Lake 
Superior  copper  district  and  concluded  "that  mineral  rights 
have  a  value  which  is  but  a  small  fraction  of  the  selling  price. 
It  is  possible  to  determine  an  average  value  for  them  which  may 
be  called  the  taxation  value.  The  actual  return  to  a  given  small 
holder  of  a  small  area  of  mineral  rights  will  depend  partly  upon 
its  accessibility  but  largely  upon  the  ability  of  himself  or  his 
neighbors  to  hustle  and  get  his  tract  developed  sooner  than  the 
tract  of  someone  else.  This  personal  ability  is  a  thing  which 
the  state  can  not  foresee  nor  tax."49 

In  discussing  the  taxation  of  leaseholds,  Mr.  Chance  calls 
attention  to  the  great  difference  among  the  states  in  the  taxation 
of  leaseholds.  ' '  The  equity  of  a  lessee  in  the  coal  is  not  assessed 
as  taxable  property  in  Alabama,  Arkansas,  Colorado,  Kansas, 
Missouri,  Utah,  and  Virginia.  Such  equity  may  be  assessed  as 
taxable  property  in  Illinois,  Iowa,  Kentucky,  Tennessee,  Ohio, 
Pennsylvania,  West  Virginia,  and  Wyoming,  but  the  practice  is 
not  uniform  throughout  any  one  of  these  states ;  in  the  aggregate 
only  a  comparatively  small  number  of  leaseholds  being  assessed 
for  taxation.  The  whole  value  of  the  coal  held  under  lease  is 
usually  assessed  to  the  owner  of  the  property,  the  equity  of  the 
lessee  being  disregarded."50 

48Finlay,  J.  R.    Appraisal  of  Mining  Properties  of  Michigan,  p.  60. 
49Lane,  A.  C.     Taxation  value  of  mineral   rights.     Engineering  and 
Mining  Journal,  1912,  XCIV,  897. 

See  also:  McDonald,  P.  B.    Taxation  of  mineral  rights  in  Michigan. 

Eng.  and  Min.  Jour.,  1912,  XCIII,  1908. 
Fourth  Biennial  Report,  Minn.  Tax  Com.,  1914.  chap.  VII. 
80Chance,  H.  M.     The  appraisal  of  coal  land  for  taxation.     Bulletin 
of  American  Institute  of  Mining  Engineers,  July,  1914,  No.  91,  p.  1461. 


703]  PROBLEMS  OF  AD  MINISTRATION  173 

VALUATION  OF  MINES  AS  AFFECTED  BY  TAXES 

Many  raining  engineers  have  assumed  that  the  effect  of  all 
taxes  upon  mining  property  is  to  reduce  the  earning  power  of 
the  property  and  likewise  the  value  of  the  property.  In  general 
this  assumption  is  correct  but  there  are  times  when  the  burden 
of  the  tax  may  be  shifted  to  the  consumer  of  the  mineral  prod- 
uct and  the  earning  power  of  the  mine  would  not  be  reduced 
directly  on  account  of  the  tax/'°a 

The  general  presumption  is  that  taxes  upon  mines  are  levied 
for  the  sole  purpose  of  raising  the  necessary  public  revenue.  It 
is  usually  argued : 

1.  If  the  tax  is  general  or  continuing  or  permanent,  the 
burden  will  fall  upon  the  consumer.    A  tax  which  affects  mines 
nationally  will  usually  result  in  an  increased  price  for  mineral 
products   (except  gold)   and  the  margin  of  profit  will  not  be 
reduced  materially  if  the  demand  for  the  product  is  not  affected 
by  the  higher  prices. 

2.  If  the  tax  is  local  or  statewide  it  can  not  be  shifted  for 
the  product  of  the  mine  must  be  sold  in  competition  with  that 
of  competing  mines  in  other  states.     These  competing  mines  in 
other  states  may  not  be  taxed  as  heavily  and  are  in  a  position  to 
continue  selling  their  product  at  the  same  price.    Therefore  the 
tax  levied  within  state  boundaries  can  not  be  shifted  easily. 

3.  If  a  tax  varies  with  the  proceeds  or  with  the  quality  of 
the  product  it  can  not  be  shifted.    Such  a  tax  falls  more  heavily 
upon  rich  mines  than  upon  poor  ones  and,  as  it  can  not  be 
shifted,  it  obviously  reduces  the  amount  available  for  the  pay- 
ment of  dividends. 

4.  If  the  tax  falls  upon  a  product  which  is  monopolized 
the  effect  is  not  definite  as  it  may  be  difficult  for  the  producer 
to  increase  the  price  of  the  product,  particularly  when  the  con- 
sumer may  substitute  something  else  for  the  product  which  is 
taxed.     The  effect  of  a  tax  on  anthracite  would  undoubtedly 
mean  that  in  certain  localities  and    industries    less    anthracite 
would  be  burned  and  more  bituminous  coal.     Generally,  how- 
ever, the  consumer  pays  the  tax,  the  amount  available  for  the 
payment  of  dividends  is  not  lessened,  and  the  value  of  the  mine 
is  not  reduced. 

5oopor  a  general  discussion  of  this  problem  in  taxation  see : 
Adams,  H.  C.    Science  of  Finance.    Book  II,  chapter  IV. 
Seligman,  E.  R.  A.    Shifting  and  Incidence  of  Taxation. 
Plehn,  C.  C.    Introduction  to  Public  Finance.    Chapter  X. 


174  MINE  TAXATION  IN   THE  UNITED   STATES  [704 

Professor  Seligman  says  that  a  tax  is  paid  by  the  man  who 
owns  the  property  at  the  time  the  tax  is  first  imposed.  To  illus- 
trate this  he  cites  the  levying  of  a  tax  amounting  to  $.25  an 
acre  on  land  that  has  been  valued  at  $20  an  acre.  This  land 
has  been  valued  at  $20  on  account  of  earnings  of  $2  per  acre, 
money  at  10  percent.  The  tax  will  reduce  the  earnings  to  $1.75 
per  acre  and  the  value  of  the  land  will  fall  immediately  to 
$17.50.  There  has  been  no  change  in  the  productiveness  of  the 
land  but  the  government  has  automatically  become  a  joint  owner 
to  the  extent  of  the  capitalized  value  of  the  tax,  namely  $2.50. 
He  continues  that  in  a  sense  the  owner  of  the  property  at  the 
time  the  tax  is  first  levied  pays  the  tax  for  all  time,  although 
there  is  an  annual  payment  of  taxes  during  the  continuance  of 
the  tax  upon  this  property. 

The  usual  effect  of  a  tax  is  to  reduce  the  level  of  profit  for 
taxes  generally  come  out  of  income  if  they  can  not  be  shifted. 
The  value  of  mining  property  is  reduced  as  taxes  become  heavier 
and  unproductive  property  may  have  no  present  value  due  to 
the  facts  that  the  annual  taxes  at  compound  interest  may  amount 
to  more  than  the  earnings. 

An  investigation  of  the  problem  of  interests  and  discounts 
in  connection  with  the  mining  of  ore  bodies  subject  to  annual 
taxation  led  Mr.  W.  L.  Uglow  to  the  conclusion  that  "an  ore 
body  held  in  reserve  for  33%  years  has  no  present  value  if  taxes 
are  levied  at  three  percent.  The  effect  of  this  tax  factor  may 
even  be  great  enough  to  impede  the  development  of  a  reserve 
for  more  than  five  or  six  years  in  advance,  or  to  cause  the  waste- 
ful depletion  of  ore  that  would  normally  last  longer  than  that 
period."" 

In  discussing  the  taxation  item  in  the  valuation  of  mines, 
Mr.  R.  B.  Brinsmade  presents52  the  following: 

Let  V  =  value  or  present  worth  of  a  $1  dividend  to  be  as- 
sessed by  taxation. 

a  =  annuity  to  be  paid  to  sinking-fund, 
r  =  rate  of  interest  earned  on  sinking-fund. 
R  =  rate  of  interest  earned  on  investment, 
t  =  current  rate  of  taxation, 
n  =  number  of  years  dividend  is  to  be  earned. 

51Uglow,  W.  L.  Methods  of  mine  valuation  and  assessment.  Wis- 
consin Geological  and  Natural  History  Survey,  1915,  Bui.  XLI,  46. 

"Brinsmade,  R.  B.  Valuation  of  iron  mines.  Transactions  of  Amer- 
ican Institute  of  Mining  Engineers,  1913,  XLV,  324. 


705]  PROBLEMS  OF  ADMINISTRATION  175 

Then  by  suggested  system  $1  =  (R  -f  t)  V  -f  a  (A) 

V  r 
and  from  algebra  a= (B) 

Substitute  in  (A)  the  value  of  a  in  (B)  and 

V  r 

Solving  (C)  forV, 

V 

r  (D) 


EXPERIENCE  OP  MINING  STATES 

The  experience  of  several  of  the  important  mining  states 
will  be  considered  in  detail  in  order  to  present  adequately  the 
problems  of  appraisal  of  the  various  types  of  mineral  properties. 

Minnesota 

When  the  system  of  taxing  iron  mines  upon  the  tonnage  of 
ore  produced  was  discontinued  in  Minnesota  in  1897,  the  gen- 
eral property  tax  was  again  made  effective  and  it  became  neces- 
sary to  appraise  the  mines.  Two  distinct  types  of  mines  are 
operated  in  this  state,  namely,  open-pits  and  mines  worked 
through  shafts.  Until  1907,  practically  the  same  methods  of 
appraisal  that  had  been  used  in  other  mining  states  were  used 
in  Minnesota  but  there  prevailed  generally  a  sentiment  that  the 
mines  were  not  paying  their  full  share  of  taxes.  The  Minnesota 
Tax  Commission  was  created  in  1907  and  a  resolution  of  the 
State  Legislature  passed  in  April,  1907,  called  the  attention  of 
the  Commission  to  the  need  of  a  revision  of  the  assessment  of 
the  mines  and  mineral  lands, — the  resolution  advising  that  the 
total  assessed  value  should  be  raised  to  approximately  $225,000,- 
000.  During  the  session  of  the  legislature  a  committee  was 
appointed  to  "investigate  the  best  methods  of  taxing  the  iron 
ore  properties."  This  committee  reported  that  the  ore  proper- 
ties were  assessed  at  only  one-fifth  the  amount  at  which  they 
should  be  assessed.  The  Tax  Commission  collected  all  data  avail- 
able concerning  the  iron  mines  and  prospects,  at  that  time  num- 
bering 2,116,  and  proceeded  to  classify  the  mines  upon  the 
technical  and  commercial  data  that  were  secured.  After  this 


176  MINE  TAXATION   IN   THE  UNITED   STATES  [706 

classification  had  been  made,  the  mines  and  lands  were  valued 
and  the  operators  were  given  an  opportunity  to  show  at  a  public 
hearing  why  the  increased  valuations  should  not  be  entered  upon 
the  tax  rolls.68 

The  full  plan  and  the  method  of  classification  and  valuation 
were  presented  at  this  meeting.  The  factors  taken  into  consid- 
eration in  the  valuation  were:  (1)  Geological  conditions;  (2) 
difficulty  of  mining;  (3)  character  of  the  ore;  and  (4)  character 
of  mining  rights. 

Classification  and  Rates  in  1908.  Mining  properties  were 
divided  into  two  grand  groups, — operating  mines  and  prospects. 
The  operating  mines  were  classed  in  five  groups,  as  follows  :54 

Class  I.  (a)  Properties  where  mining  was  comparatively 
inexpensive  and  the  ore  high  grade. 

(b)     Properties  where  mining  was  comparatively  easy 
and  the  ore  of  lower  grade. 

Class  II.  Properties  where  mining  was  somewhat  more 
difficult  and  the  mining  cost  greater  than  in  the  case  of  Class  I, 
and  the  ore  of  mixed  grade. 

Class  III.  Underground  properties  where  the  expense  of 
mining  was  comparatively  low  for  that  kind  of  mining  and  the 
ore  of  high  grade. 

Class  IV.  Underground  or  milling-pit  properties  of  dis- 
tinctly second  grade,  determined  by  a  higher  cost  of  mining  and 
lower  grade  of  ore  than  in  the  case  of  Class  III. 

Class  V.  Mines  of  inferior  character  where  expenses  of 
operated  were  high. 

Prospects  were  divided  into  four  classes  or  groups,  as  fol- 
lows: 

Class  I.  Lands  that  had  been  drilled  and  test-pitted,  and 
where  stripping  of  the  overburden  had  been  carried  on.  In 
other  words,  where  the  property  was  about  to  become  a  mine. 

Class  II.  Lands  that  had  been  drilled  and  test-pitted  and 
ore  found  in  some  abundance. 

Class  III.    Unexplored  lands  near  good  mining  properties. 

Class  IV.  Lands  that  had  not  been  explored  but  were  in 
the  well  known  ore-belt. 

The  rates  of  valuation  per  ton  in  the  ground  were  fixed  as 
shown  in  Table  No.  4. 

"Minnesota  Tax  Commission,  First  Biennial  Report,  1908,  p.  119. 
**Ibid.,  p.  120. 


707] 


PROBLEMS  OP  ADMINISTRATION 


177 


TABLE  No.  4. 

MINNESOTA   IRON   ORE    RATES   IN    1 908. 


Class 

Class 

Class 

Class 

Class 

I 

II 

III 

IV 

V 

Operating  mines  (a)  — 

33C 

270 

230 

190 

140 

11     (b)._... 

300 

Prospects  

I5c 

IOC 

8c 

$3  to  $50  per  acre 

"In  the  determination  of  the  rates,  the  Commission  was 
confronted  by  a  number  of  serious  problems, — how  to  get  a  tax- 
able valuation  of  iron  properties  that  would  be  fair  to  the  state 
and  to  the  owners  of  the  properties.  The  rates  arrived  at  were 
in  the  main  determined  by  several  factors: 

(1)  The  difference  between  the  cost  of  mining  and  the 
average  price  of  iron  ore  during  the  preceding  three  years. 

(2)  By  the  present  worth  of  the  difference  for  a  period  of 
twenty  years  on  a  basis  of  four  percent  rate  of  interest. 

(3)  By  the  percentage  of  the  assessed  valuation  of  real 
property  in  the  state  to  the  full  value  of  such  property. 

The  classes  referred  to  and  the  rates  established  for  them 
were  determined  as  far  as  possible  by  the  differences  between 
mines  in  cost  of  operation,  difficulty  of  mining,  and  grade  of  ore. 

No  better  method  of  valuation  was  suggested  at  the  hearing 
of  mine  owners,  and  it  was  the  best  that  the  commission  could 
do  under  the  ad  valorem  requirements  of  the  law."65 

The  report  of  the  commission  shows  that  there  was  a  dispo- 
sition on  the  part  of  the  mining  companies  to  give  all  help  that 
would  lead  to  a  fair  valuation. 

During  subsequent  years  some  improved  methods  have  been 
used.  The  Second  Biennial  Report  of  the  Commission  gives  fur- 
ther details,86  describing  how  the  estimate  of  tonnage  was  made 
and  how  the  ore  was  graded. 

Prior  to  1909,  the  classification  of  iron  ore  and  the  tonnage 
estimates  were  based  largely  on  blue  prints  of  explorations  fur- 
nished by  owners,  lessees,  or  operators  of  the  various  properties. 
It  was  deemed  advisable  to  have  the  exploration,  computations, 
and  estimates  verified  by  disinterested  and  competent  engineers. 
In  June,  1909,  the  faculty  of  the  Mining  Department  of  the 

55Ibid.,  p.  122. 

MSccond  Biennial  Report,  1910,  p.  56.    See  also  Third  Biennial  Report, 
1912,  p.  65. 


178 


MINE  TAXATION   IN   THE  UNITED   STATES 


[708 


University  of  Minnesota  entered  upon  this  work  for  the  Tax 
Commission  and  has  continued  the  work  to  date. 

Classification  and  Rates  in  1909.  In  1909  a  rearrangement 
of  classes  was  made,  the  various  mineral  properties  being  classi- 
fied as  active  mines,  reserves,  and  sub-reserves.57  "Reserves  are 
described  as  mineral  properties  that  have  been  drilled  and 
tested,  and  upon  which  measurable  tonnages  of  merchantable  ore 
are  known  to  exist  but  have  not  been  developed,  because  of  re- 
moteness from  or  lack  of  transportation  facilities,  market  con- 
ditions, or  other  causes  that  would  render  the  present  operation 
unprofitable.  Sub-reserves  are  a  secondary  class  of  reserves  and 
are  valued  at  a  lower  rate  than  either  of  the  other  classes. '  '58 

The  classes  and  rates  in  1909  are  shown  in  Table  No.  5. 

TABLE  No.  5. 

MINNESOTA  IRON   ORE   RATES   IN    1909. 


Active 
mines 
cents 

Reserves 
cents 

Sub- 
reserves 
cents 

Class  I      

11 

21 

is 

Class  2  

30 

18 

IO 

Class  •; 

27 

IS 

Class  4. 

21 

II 

Class  5  

10 

IO 

Class  6  

14 

8 

The  only  change  made  in  the  active  mines  in  the  new  classi- 
fication was  in  the  class  number,  1-b  being  eliminated,  and  the 
classes  numbered  from  1  to  6  consecutively.  Considerable 
change,  however,  was  made  in  the  reserve  classes,  five  new  classes 
being  added  and  a  substantial  increase  in  rates  made  in  two 
other  classes.  It  was  felt  that  certain  reserves  adjacent  to  active 

^Second  Biennial  Report,  1910,  p.  80.  "In  addition  to  reserves  there 
is  a  class  of  unexplored  lands  that  from  surrounding  deposits  and  other 
circumstances  justify  the  belief  that  they  contain  merchantable  ore.  In 
such  cases  the  assessed  value  is  usually  placed  at  a  much  higher  figure 
than  adjoining  lands  that  are  known  to  be  outside  of  the  mineral  belt, 
or  on  lands  that  have  been  drilled  and  no  merchantable  ore  found  on 
them."— Ibid.,  p.  85. 

™Third  Biennial  Report,  1912,  p.  85. 


709] 


PROBLEMS  OF  ADMINISTRATION 


179 


mines  and  shortly  to  become  shipping  mines  should  take  a  higher 
rate  than  the  one  first  imposed  by  the  commission.89 

After  the  work  of  re-classification  had  been  completed  in 
1910  and  new  tonnages  and  reserves  had  been  added  to  the 
assessment  rolls,  the  commission  made  a  general  increase  of  5 
percent  on  all  mines,  reserves,  and  other  lands  in  the  ore  belt. 
The  rates  after  this  increase  had  been  applied  are  given  in  Table 
No.  6. 


TABLE  No.  6. 

MINNESOTA   IRON   ORE   RATES   IN 


Active 
mines 
cents 

Reserves 
cents 

Sub- 
reserves 
cents 

Class  i    

^4.65 

22.05 

15.75 

Class  2  

31.50 

18.90 

10.50 

Class  i 

28.  15 

15.75 

Class  4                                         

24.  IS 

11.55 

Class  5  

19.95 

10.50 

Class  6 

H.7O 

8.40 

Rates  in  1911  and  1912.  The  tonnage  rates  in  1911  were 
the  same  as  in  1910  for  the  same  classes.  In  1912  a  general 
increase  of  5  percent  was  made.  The  1912  rates  are  given  in 
Table  No.  7. 

Classification  and  Rates  in  1914.  The  standard  classification 
employed  in  1914,  as  given  in  the  Tax  Commission  Report  for 
1914,61  follows: 

Active  Mine  Tonnage 

Class 

1.  Open  pit,  low  mining  cost,  high  grade  ore. 

2.  Open  pit,  moderate  mining  cost,  medium  grade  ore. 

3.  Open  pit,  high  mining  cost,  mixed  grade  ore. 

•    4.    Underground,  low  mining  cost,  high  grade  ore. 

*»Ibid.,  p.  80. 

60Applied  to  shipping  mines,  Itasca  county. 

^Fourth  Biennial  Report,  chap.  VI  and  VII. 


180 


MINE  TAXATION  IN   THE  UNITED  STATES 


[710 


5.  Underground,  moderate  mining  cost,  medium  grade  ore. 

6.  Underground,  high  mining  cost,  excess  rock  and  water, 
mixed  grade  ore. 

Reserve  Tonnage 
Class 

1.  Undeveloped  reserve  ore  of  active  mines,  class  1. 

2.  Undeveloped  reserve  ore  of  active  mines,  class  2. 

3.  Undeveloped  reserve  ore  of  active  mines,  class  3. 

4.  Partially  developed  and  stripped,  high  grade  ore. 

5.  Partially  developed,  not  stripped,  medium  grade  ore. 

6.  Partially  developed  not  stripped,  mixed  grade  ore. 

TABLE  No.  7. 

MINNESOTA   IRON   ORE   RATES   IN    IQI2. 


Active 
mines 
cents 

Reserves 
cents 

Sub- 
reserves 
cents 

Class  i  

36.3825 

23.1525 

16.5375 

Class  2 

^•*.O75O 

10.84.50 

11.0250 

Class  V-  - 

20.767  5 

16.5175 

Class  4 

25.^575 

12.1275 

Class  5 

2O.Q4.75 

11.0250 

Class  6«» 

i6.5*;75 

8.82 

Class  7  

15.4.150 

Class  8 

14..  7O 

In  1907  classes  3,  5,  and  6  were  numbered  1,  2,  and  3  and 
corresponded  with  standards  described  in  classes  4,  5,  and  6. 
Class  3  is  also  a  sub-reserve  rate  for  class  1  and  for  active  mines 
of  wash  ore.  Class  5  is  also  a  sub-reserve  rate  for  class  3. 

General  rate  increases  of  5  percent  have  been  made  in  1910, 
1912,  and  1914.  These  represent  a  total  increase  over  the  1907 
valuation  of  15.75  percent. 

The  assessed  rates  per  ton  which  have  been  used  since  the 
appraisal  has  been  made  by  the  Tax  Commission  have  been  as 
shown  in  Table  8. 


711] 


PROBLEMS  OF  ADMINISTRATION 


181 


O 
X 


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D 

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TJ-  o   r^  M   w   o> 

N    (1    M    M    M 

$  ~ 
(5 

11 

O    f5  ^O    fO   »>   « 

c<    r^  N  vo    ov  M 

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00    •*   -   vO    «   \O 
rO   fC   CO   (S    N    « 

C 

£ 

t  $ 

>O   10   •*   rO   ro   N 

1-1  oo   10  «   o  oo 

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8,1 

a  « 
1  ° 

ro    O\  \O     N     w    00 

f-i     —     —  .     —     « 

$  2 

+S    ON 
£$     ~ 

<U    co 

•S  c 

OO   OO    t>.  vO    1C   rj- 
ro   O    t~»   ro   O^   •* 

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<i     0 

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CO   PO   W    W    N    •* 

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10  o   m  10  o   o 

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d     M     M     M    M 

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11 

i/5   O    iO   iO   »O   O 
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S  8 

Tj-     H-     00       Tj-     O\     ^*" 

rO    fO   N     N     •*     w 

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Reserve 
cents 

"-00    >/5   "-"     O    OO 
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Reserve 
cents 

! 

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Si 
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*5  o 

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182 


MINE  TAXATION  IN  THE  UNITED  STATES 


[712 


This  classification  is  adjusted  so  that  proper  allowances  can 
be  made  for  the  following  conditions: 

The  classification  provides  automatic  rate  adjustments  to 
meet:  (1)  the  greater  value  of  the  better  grades,  and  the  shorter 
periods  of  discount  for  active  mine  ore  exhaustion,  or  both;  (2) 
the  various  grades  and  the  longer  periods  of  discount  for  the 
reserves  of  active  mines  and  of  all  other  reserves;  (3)  the  proper 
rate  to  apply,  as  a  reserve  passes  into  the  active  or  operating 
mine  class. 

The  effect  of  this  method  of  valuation  is  exhibited  by  the 
data  in  Table  No.  9. 

TABLE  No.  9. 

ASSESSED    VALUE    OF    PROPERTY    IN    MINNESOTA. 


1906 

1912 

Assessed 
value 

Percent 
total 

Assessed 
value 

Percent 
total 

All  real  property  
Acre  property  

$751,887,611 
392,979,128 

52.27 

$  492,172,962 

42.78 

City  and  village  property 
Mineral  property 

294,422,074 
64,486,  4.00, 

39.16 

8.57 

398,802,305 
25Q.4l8.277 

34-67 

22.  SS 

Factors  in  Present  Valuation.  The  essential  and  controlling 
features  of  this  method  of  valuation  seem  to  be  based  upon  the 
following : 

1.  Gross  tonnage  of  ore  in  the  state. 

2.  Total  annual  output. 

3.  Average  rate  of  exhaustion. 

4.  Classification  of  mines  and  reserves,  according  to  quality 
of  ore,  marketability,  present  cost  of  mining,  and  average 
profit  per  ton. 

5.  On  the  basis  that  money  is  worth  4  percent  and  that  the 
average  period  of  exhaustion  for  all  the  mines  of  the 
state  would  be  20  years,  the  present  worth  of  the  ore  was 
determined  for  each  class. 

6.  Upon  this  base  equalization  has  been  effected,  first,  be- 
tween individual  mines,  on  account  of  any  important  local 


713]  PROBLEMS  OF  ADMINISTRATION  183 

conditions  which  were  not  made  factors  in  the  classifica- 
tions ;  and  later  between  the  mines  and  other  property. 
According  to  the  laws  now  in  force  property  is  assessed  as 
follows : 

Class  I.  Iron  ore  whether  mined  or  unmined  shall  constitute 
class  one  (1)  and  shall  be  valued  and  assessed  at  fifty 
(50)  percent  of  its  true  and  full  value.  If  unmined,  it 
shall  be  assessed  with  and  as  a  part  of  the  real  estate  in 
which  it  is  located,  but  at  the  rate  aforesaid.  The  real 
estate  in  which  iron  ore  is  located,  other  than  the  ore, 
shall  be  classified  and  assessed  in  accordance  with  the 
provisions  of  classes  three  (3)  and  four  (4)  as  the  case 
may  be.  In  assessing  any  tract  or  lot  of  real  estate  in 
which  iron  ore  is  known  to  exist  the  assessable  value  of 
the  ore  exclusive  of  the  land  in  which  it  is  located,  and 
the  assessable  value  of  the  land  exclusive  of  the  ore  shall 
be  determined  and  set  down  separately  and  the  aggregate 
of  the  two  shall  be  assessed  against  the  tract  or  lot.  Min- 
nesota Laws  of  1913,  chap.  483. 
Class  II.  Household  goods  shall  be  valued  and  assessed  at  25 

percent  of  the  full  and  true  value. 

Class  III.  Live  stock,  stocks  of  merchandise,  tools,  machinery, 
and  all  unplatted  real  estate,  except  as  provided  in  Class 
I,  shall  be  valued  and  assessed  at  thirty-three  and  one- 
third  percent  of  the  true  and  full  value  thereof. 
Class  IV.  All  property  not  included  in  the  three  preceding 
classes  shall  be  valued  and  assessed  at  forty  percent  of  the 
full  and  true  value. 

The  reason  given  for  appraising  mined  and  unmined  ore 
at  50  cents  on  the  dollar  while  other  property  is  valued  at  a 
lower  rate  is  that  property  in  general  continues  the  object  of 
taxation,  but  mines  and  the  ores  they  produce  are  taxed  for  a 
relatively  short  time.62  By  some  it  is  claimed  that  this  is  practi- 
cally a  method  of  taxing  unearned  increment,  or  what  might  be 
called  a  "natural  increment". 

The  legislature  of  1905  enacted  the  following  law : 

62There  is,  therefore,  a  question  whether  taxes  are  levied,  as  claimed, 
simply  upon  profits;  apparently  there  is  an  effort  made  to  take  for  the 
state  a  share  in  the  proceeds  of  the  ore.  The  ultimate  effect  of  such 
practice  will  undoubtedly  be  to  reduce  the  value,  to  the  mine  operator 
and  land  owner,  of  ore  in  the  ground,  on  account  of  this  increased  expendi- 
ture for  taxes. 


184  MINE  TAXATION  IN  THE  UNITED   STATES  [714 

"That  whenever  any  mineral,  gas,  coal,  oil,  or  other  similar 
interests  in  real  estate  are  owned  separately  and  apart  from 
and  independently  of  the  rights  and  interests  owned  in  the  sur- 
face of  such  real  estate,  such  mineral,  gas,  coal,  oil,  or  other 
similar  interests  may  be  assessed  and  taxed  separately  from  such 
surface  rights  and  interests  in  said  real  estate,  and  may  be  sold 
for  taxes  in  the  same  manner  and  with  the  same  effect  as  other 
interests  in  real  estate  are  sold  for  taxes."83 

Owing  to  the  decisions  of  the  courts  in  Washburn  v.  Greg- 
ory Company,64  it  is  recommended  by  the  Tax  Commission65  that 
the  legislature  change  the  present  law  in  the  preceding  para- 
graph, and  ' '  provide  that  an  assessment  on  any  land  by  its  ordi- 
nary description  shall  be  deemed  to  cover  all  mineral  reserva- 
tions. If  the  legislature  should  deem  it  wise  to  change  the  law 
as  above  indicated  it  should  also  make  a  provision  that  in  case 
the  owner  of  the  surface  or  the  owner  of  the  mineral  rights 
asked  to  have  them  separately  assessed  his  request  should  be 
complied  with. ' ' 

Engineering  Field  Work.  The  appraisal  as  carried  on  at 
present  through  the  Mining  Department  of  the  University  of 
Minnesota  meets  with  the  hearty  co-operation  of  the  mining 
companies  and  the  complete  records  of  prospecting  and  devel- 
opment, as  well  as  data  on  costs,  analysis,  and  prices  of  ore  are 
available  for  the  use  of  the  engineers  of  the  Tax  Commission. 
The  drill  records  and  other  data  of  ore  development  are  checked 
as  far  as  possible  and  the  tonnages  are  determined  by  the  engi- 
neers. Properties  are  inspected  from  time  to  time  and  as  fre- 
quently as  developments  of  new  ore-bodies  and  exhaustion  of 
old  ones  indicate  important  changes  in  a  mine.  The  tonnages 
are  classified  and  the  mining  companies  have  an  opportunity  to 
file  a  protest  against  both  the  tonnage  and  the  classification.*6 
The  rate  for  each  class  is  determined  by  the  Tax  Commission 
and  each  mine  is  then  appraised  at  half  the  amount  resulting 
from  adding  together  the  value  of  the  ore  in  each  class  figured 
at  the  rates  for  that  class.67 

03General  Statutes,  1913,  sec.  1973. 

64i2S  Minn.  491. 

^Fourth  Biennial  Report,  1914,  p.  152. 

66In  1914  there  were  but  eleven  applications  for  reduction  in  the 
assessment  of  mineral  properties  and  these  were  all  of  minor  importance. 
(Ibid.,  p.  84). 

•7The  rates  have  been  increased  5  percent  three  times  since  the  first 
appraisal;  this  represents  a  total  increase  of  15  3/4  per  cent  over  the 


715]  PROBLEMS  OF  ADMINISTRATION  185 

Cost  of  Appraisal.  The  cost  of  the  appraisal  by  the  engi- 
neers is  comparatively  small  when  the  gross  value  of  the  prop- 
erties appraised  is  considered.  At  the  present  time  the  engineers 
are  not  making  any  analyses  of  ores  as  there  is  sufficient  check- 
ing of  analyses  at  the  mine,  at  the  docks,  and  at  the  iron  furnaces. 
The  engineers  do  not  investigate  titles  as  this  is  done  by  other 
employees  of  the  commission.  The  entire  expense  of  the  engi- 
neering work  together  with  a  pro  rata  share  of  the  entire 
expense  of  the  Tax  Commission  is  approximately  $14,000.  The 
assessed  valuation  of  the  iron  ore  of  the  state  in  1913  was 
$256,676,686  and  the  total  taxes  paid  by  the  mining  companies 
amounted  to  $6,258,291.  This  represents  an  expenditure  of 
$.0000545  per  $1000  appraised  and  $.00224  per  $1000  of  taxes 
collected. 

Michigan 

FINLAY  APPRAISAL.  For  a  number  of  years  following  1891, 
the  year  in  which  the  tonnage  tax  was  repealed,  there  was 
considerable  dissatisfaction  on  the  part  of  tax-payers,  particu- 
larly the  owners  of  farm  lands,  with  the  results  of  the  assessment 
of  the  mineral  properties  in  Michigan.88  The  work  done  in 
Minnesota  in  appraising  the  iron  ore  mines  and  lands  attracted 
attention  and  in  1911  the  Michigan  legislature  instructed  the 
State  Tax  Commission  to  secure  competent  technical  assistance 
and  make  a  complete  appraisal  of  all  the  mines  of  the  state. 
The  time  allotted  for  doing  the  work  was  short  but  a  compre- 
hensive report  was  submitted  which  laid  the  foundation  for  a 
systematic  procedure  for  appraising  the  mines  of  the  state.  In 
Minnesota  there  were  only  iron  mines  to  appraise,  while  in 
Michigan  there  were  iron,  copper,  coal,  salt,  and  gypsum  mines 
as  well  as  quarries.  These  latter,  however,  the  appraiser  did 
not  consider  advisable  to  classify  as  "mines"  and  limited  his 

1907  valuation.  The  instructions  now  are  that  mining  property  shall  be 
valued  at  50  cents  on  the  dollar.  Formerly  it  was  estimated  that  property 
was  appraised  at  43  cents  on  the  dollar ;  a  15  3/4  percent  increase  on  this 
basis  would  mean  6.77  cents  which  would  raise  the  basis  for  mines  to 
49.77  cents  on  the  dollar.  It  is  evident  that  the  new  law  will  make  little 
•change  in  the  results  of  the  appraisal  of  mines. 

68The  following  data  will  illustrate  the  reason  for  this  dissatisfaction : 
A  mine  was  listed  by  the  assessors,  on  1/3  valuation  ....$     50,000.00 

Cash  paid  in  by  stockholders  1,200,000.00 

Company's  estimate  of  real  estate,  plant,  equipment 807,334.95 

Market  value  of  stock 300,000.00 

Gross  earnings  for  year  178,727.53 


186  MINE  TAXATION   IN   THE  UNITED   STATES  [716 

report  to  the  copper,  iron,  and  coal  mines.  As  the  mines  that 
were  appraised  included  some  types  distinct  from  those  valued 
by  the  Minnesota  Tax  Commission,  the  appraiser's  report  will 
be  considered  in  some  detail.  The  appraiser  endeavored  to 
determine  the  "value  of  the  mines  to  the  permanent  owner  for 
the  production  of  minerals"89  and  did  not  consider  the  market 
value  of  the  stock  of  companies,  insisting  that  speculative  value 
should  not  enter  into  a  conservative  appraisal. 

Factors  in  Valuation.  The  valuation  was  based  on  three 
factors, — average  cost  of  production,  average  prices,  and  an 
estimate  of  the  future  period  of  production.  Average  costs  of 
product  and  average  prices  of  product  were  determined  by 
experience  but  the  trend  of  future  prices  was  considered.  ' '  The 
life  of  the  mine  is  based  partly  on  developed  ore  and  partly 
upon  an  assumption  of  continuance  of  known  ore  bodies  beyond 
the  present  bottom  levels  of  the  mines.  The  assumption  of 
continuance  is  based  mainly  upon  the  extent  to  which  the  con- 
tinuity of  the  deposits  has  been  proved  for  the  district  and 
for  the  type  to  which  the  mine  belongs.  The  future  value  of  a 
series  of  dividends  is  reduced  to  a  present  value  by  the  annuity 
method;  that  is,  a  sum  is  calculated  upon  which  the  series  of 
dividends  shall  pay  5  percent  interest  and  also  provide  each 
year  a  sinking-fund  installment  which,  invested  each  year  at  4 
percent  interest,  and  added  to  prior  installments  similarly  in- 
vested and  reinvested,  will  equal  the  sum  taken.  This  sum  is 
the  amount  which  an  investor  can  afford  to  pay  for  the  prop- 
erty. ' '  On  this  basis  no  present  value  was  given  to  unprofitable 
mines.  Likewise  unproductive  property  could  not  be  assessed 
on  this  basis. 

In  appraising  the  copper  mines,  the  market  value  of  mining 
stock  was  not  considered  nor  the  equipment  of  the  mines,  but 
simply  the  earning  power  and  the  life  of  each  mine.  In  order 
to  determine  the  value  of  the  mines,  the  data  of  costs  and  pro- 
duction for  five  years  were  collected  together  with  the  prospect- 
ive tonnage  and  content  of  rock  from  unmined  areas.70  Only 
nine  copper  mining  companies  paid  dividends  from  1905  to 
1910;  the  record  of  twelve  mines  was  such  that  they  could  be 

•9Finlay,  J.  R.    Appraisal  of  Mining  Properties  of  Michigan,    p.  i<x 

TOFrotn  the  production  to  date,  an  estimate  for  such  mine  was  made 

to  determine  the  output  of  mineral  per  acre.     Allowing    a    factor    for 

decrease   in   value  with   depth,   the   probable   output    from   the   unmined 

areas  was  determined. 


717]  PROBLEMS  OP  ADMINISTRATION  187 

classed  as  probably  profitable  in  the  future.  All  of  the  other 
mines  were  appraised  at  zero  on  account  of  their  records  of  cost 
of  production.  Attempts  to  determine  an  acreage  value  for 
unproductive  mines  and  undeveloped  lands  were  not  successful. 
According  to  the  appraiser  it  seemed  "ridiculous  to  place  a 
valuation  upon  lands  which  have  no  showing  at  all  when  costly 
operations  upon  lands  that  have  considerable  showings  of  copper 
have  not  proved  those  showings  to  have  any  value,  but,  on  the 
contrary,  in  most  cases  have  proved  them  not  to  have  any 
value."71 

Mr.  Finlay  discussed  at  some  length  the  value  of  iron  ore, 
the  possible  effect  upon  Michigan  iron-mining  of  foreign  com- 
petition, and  the  effect  of  taking  off  the  tariff  on  manufactured 
iron  and  steel.  He  concluded  that  "the  iron  ore  market  will 
continue  in  the  future  on  substantially  the  same  course  it  has 
pursued  in  the  past;  that  the  demand  is  sure  to  increase,  and 
that  prices  are  more  likely  to  be  higher  than  they  are  to  be 
lower  than  the  average  of  the  past  seven  years."72  Attention 
was  called  to  the  fact  that  many  iron  mines  operate  upon  leased 
lands  and  pay  a  royalty  per  ton  of  iron  ore  mined.  Such  roy- 
alties may  be  considered  from  the  viewpoint  of  the  mining 
operator  as  an  expense;  from  the  viewpoint  of  the  state  they 
represent  a  net  profit  of  the  iron  mining  business. 

On  the  basis  of  iron  ore  reserves  and  records  of  costs  and 
profits,  it  was  estimated  that  productions  and  earnings  could 
be  continued  on  the  iron  ranges  on  the  same  basis  for  sixteen 
years,  and  probably  a  longer  period.  The  estimates  of  ore 
reserves  were  based  on  (a)  ore  found  in  drill-holes,  (b)  ore 
reported  by  companies  as  being  in  sight  above  the  bottom  levels 
of  the  mines,  and  (c)  an  additional  amount  of  ore  added  on 
the  judgment  of  the  appraisers  based  upon  the  conditions  on  the 
bottom  levels.  In  some  of  the  districts  extensive  drilling  made 
it  possible  to  estimate  the  extent  of  the  ore-bodies  with  sufficient 
accuracy  for  such  an  appraisal.  The  following  paragraph  from 
the  discussion  of  the  valuation  of  the  Menominee  Range  indi- 
cates the  manner  in  which  generalizations  as  to  the  continuity 
of  the  ore-bodies  of  the  districts  were  made. 


p.  32. 
''-Ibid.,  p.  37. 


188  MINE  TAXATION  IN  THE  UNITED  STATES  [718 

"The  total  amount  of  ore  accounted  for  above  the 
1,160  foot  level  is  50,645,807  tons.  This  means  that  the 
average  horizontal  area  of  the  ore-bodies  has  been  in  the 
past  approximately  440,000  square  feet.  If  we  assume  that 
this  area  is  normal  for  the  580  foot  level  and  that  for  the 
1,160  foot  level  the  area  is  only  263,000  square  feet,  we 
get  a  diminution  of  approximately  180,000  square  feet  in 
600  feet.  This  means  that  each  additional  100  feet  in  depth 
means  a  diminution  of  area  of  30,000  square  feet.  On  this 
basis  we  might  assume  that  the  ore  would  vanish  at  a  depth 
of  1,900  feet.  This  assumption  would  leave  us  below  the 
present  bottoms  approximately  9,000,000  tons."73  "A  con- 
tinuation of  life  (of  a  mine  at  the  assumed  rate  of  produc- 
tion) beyond  20  years  adds  to  the  present  value  very  slowly, 
and  wherever  the  ore  supply  is  sufficient  to  maintain  output 
for  even  15  years,  it  is  not  worth  while  to  be  critical  about 
the  amount  of  addition  that  might  be  made."7* 
The  problem  of  determining  the  length  of  the  period  from 
which  average  operating  costs  and  average  market  prices  shall 
be  determined  has  aroused  considerable  discussion.  In  Great 
Britain  this  has  been  fixed  by  law.™ 

Mines  which  are  being  exhausted  rapidly  and  whose  output 
and  value  are  declining  rapidly  would  obviously  benefit  by 
being  assessed  on  a  three-years'  average.  One  effect  of  the  five- 
years'  average  period  is  that  Mr.  Finlay  determined  the  average 
price  of  copper  for  the  period  of  twenty  years  and  found  that 

™lbid.,  p.  51. 

™Ibid.,  p.  57- 

75The  Income  Tax  Act  of  1842  specified  that  collieries,  in  common 
with  other  mines,  shall  be  assessed  on  the  full  gain  of  one  year,  or  an 
average  of  the  five  preceding  years,  but  if,  from  some  unavoidable  cause, 
any  mine  has  been  decreased  and  is  decreasing  in  the  annual  value,  so 
that  a  five-years'  average  will  not  give  a  fair  and  just  estimate  of  the 
annual  value,  such  annual  value  can  be  computed  on  the  actual  amount 
of  profits  for  the  preceding  year.subject  to  the  usual  abatement  on  account 
of  diminution  of  duty  within  the  current  year;  and  if  any  mine  shall  have 
wholly  failed,  the  assessment  can  be  wholly  discharged.  (Transactions 
of  Institute  of  Mining  Engineers,  1914,  XXIX,  93). 

By  the  Act  of  1866,  mines  were  transferred  to  the  schedule  for  prop- 
erty assessed  on  the  three  years'  average.  Quarries  were  transferred  from 
the  class  of  property  assessed  on  a  one-year  basis  to  the  class  on  the  three- 
year  basis.  However,  mines  are  generally  appraised  on  the  average  of 
five  years'  returns. 


719]  PROBLEMS  OF  ADMINISTRATION  189 

there  has  been  a  gradual  increase  in  the  price.  He  also  con- 
sidered the  average  over  ten-year  periods  and  came  to  the  con- 
clusion that  the  trend  was  upward.  The  average  for  the  last 
ten-year  period  was  14.702  cents  per  pound,  and  he  used  14 
cents  as  the  average  price  in  his  valuation.  For  most  of  the 
mines  the  average  cost  was  figured  on  a  five-year  basis. 

In  estimating  the  price  of  iron  ore,  the  average  quotations 
for  standard  ores  for  a  period  of  seven  years  were  taken;  this 
average,  however,  differed  but  little  from  the  average  for  five 
years.  In  determining  the  probable  cost  of  mining  iron  ore 
the  average  cost  for  the  period  of  five  years  preceding  was 
taken  and  allowance  made  for  any  expected  increase  or  decrease 
in  operating  expenses.  To  illustrate  the  method  of  calculation 
,used  in  determining  the  present  value  of  the  iron  mines  the 
following  summary  of  data  (Table  No.  10)  for  the  five-year 
period  for  District  I  is  given.76  Similar  data  were  compiled 
for  the  other  districts. 

As  a  result  of  the  Finlay  appraisal  there  followed  consid- 
erable discussion  and  many  protests  were  made  by  the  iron 
mining  interests.  The  officers  of  the  Michigan  Tax  Commission 
arranged  for  hearings  of  the  complaints  of  the  mining  interests 
and  a  number  of  changes  were  made  in  the  valuations  of  the 
appraiser  before  they  were  placed  upon  the  assessor's  lists.77 

MICHIGAN  SYSTEM  OF  APPRAISAL.  Since  1911,  the  Tax  Com- 
mission has  had  technical  assistance  in  appraising  the  iron 
mines  and,  beginning  with  1913,  the  State  Geologist  has  been 
Mine  Appraiser  for  the  Tax  Commission. 

In  order  to  show  the  essential  characteristics  of  the  meth- 
ods at  present  in  use  by  the  Michigan  Geological  Survey,  it  may 
not  be  inappropriate  to  point  out  specifically  the  points  in  which 
departures  have  been  made  from  the  Finlay  appraisal  of  1911. 

(1)  The  Finlay  method  followed  more  or  less  rigid  rules 
while  the  present  method  is  comparatively  elastic. 

(2)  The  interest  rate  now  used  is  6  percent  on  both  capi- 
tal and  redemption  fund,  while  Mr.  Finlay  used  5  and  4  percent 
respectively. 

"Finlay,  op.  cit.,  p.  61. 

"Mr.  Finlay  valued  the  iron  mines  of  the  four  counties  at  $119485,000; 
the  supervisors  had  appraised  the  same  mines  at  $19,623,508;  the  Tax  Com- 
mission adopted  the  figures  $85,567,500.  Mr.  Finlay's  figures  for  the 
copper  mines  were  not  placed  on  the  tax  roll  in  any  of  the  counties. 


190 


MINE  TAXATION   IN   THE  UNITED   STATES 


[720 


TABLE  No,  10. 

DISTRICT   NO.    I. 
GOGEBIC   COUNTY,   MICHIGAN. 


Totals 

Per  ton 

Number  of  mines  and  explorations  reported  .... 
Wages  and  salaries  paid  _             .    . 

20 
$16.612.206.4.0 

General  expenses  (not  including  taxes)  

$   I.S58.7OS.Q3 

$  .098 

Construction,  development  and  explorations.... 
Mining  expense                    

4,083,864.20 
2I,2O7,IO5.IO 

.260 
I.^SS 

Total  cost  at  mine.-  _  

$26,849,675.23 

1.72 

Rail  freights  paid       _        .        

6.002.288.^7 

.40 

Lake  freights  paid  

IO.S8S.Q2I.64 

.71 

Commissions  paid  

69  s,  520.57 

.046 

Total  expense           

$44..IH.4.OS.8l 

2.876'« 

Total  tons  sold.__  15,183,842 

F.  O.  B. 
Cleveland 

Total  tons  shipped  15,393,642 

Total  tons  mined  I5»7II»°53 

Receipts  from  sale  of  ore  

65,694,536.07 

Total  operating  profit  of  12  mines  

2I.Q,14.,68VS7 

Taxes          .              

QQ2,272.42 

Proportion  taxes  to  operating  profits  (%)  
Royalties 

4-55 
S.o6o.4.o^.6s 

Profit  to  companies  (12  mines)       

IS.2I2.8S4..V) 

Total  profits  12  mines  including  royalties.-  
Total  loss  to  three  mines   (Exploration  and 
development  properties  not  included)  
Total  tonnage  reported  in  sight  

20,957,4I9-53 

678,579-85 
I7.3S4.IOO 

Tons  added  by  appraiser  

25,645,900 

Total  tonnage  expected                 

43,000,000 

Average  yearly  value  (expected)  per  ton._  
Average  cost  per  ton  expected  P.  O.  B.  Cleve- 
land                

$                    4-22 

2.87" 

Average  profit  per  ton  expected  

1.35 

Annual  tonnage  expected 

2,875,000 

Present  value  of  mines  

$4I,56o,OOO.OO 

78The  average  cost  per  ton  includes  mines  worked  at  a  loss. 
T9The  expected  cost  per  ton  is  only  for  mines  expected  to  work  at  a 
profit. 


721]  PROBLEMS  OF  ADMINISTRATION  191 

(3)  At  present  in  the  valuation  of  undeveloped  or  unpro- 
ductive mines  when  earnings  will  be  deferred,  proper  allowance 
is  made. 

(4)  The  Finlay  valuation  did  not  include  ore  in  stock 
piles.    At  present  such  ore  is  included  in  the  valuation. 

(5)  Mr.  Finlay  did  not  appraise  unprofitable  operating 
properties.     These  are  now  valued  according  to  the  judgment 
of  the  appraiser  because  the  mine  is  supposed  to  be  worth  some- 
thing or  otherwise  it  would  not  be  operated. 

(6)  Mr.  Finlay  appraised  for  taxation  on  the  basis  of  value 
to  the  owner.     The  present  method  attempts  to  determine  the 
value  on  the  market. 

(7)  With  the  higher  rate  of  interest  now  used,  hazard 
rates  or  "cuts"  are  applied  to  the  various  factors  according  to 
the  judgment  of  the  appraiser.     These  hazards  vary  with  the 
mine.     This  has  been  found  preferable  to  a  sliding  scale  of 
interest. 

(8)  Mr.  Finlay  figured  on  future  prices  of  the  product. 
The  present  Michigan  method  is  based  on  the  prices  and  profits 
for  an  average  of  the  last  five  years.    Mining  costs  are  figured 
in  about  the  same  manner. 

Capital  Account.  Capital  account  is  not  allowed  in  the 
cost  sheets  of  the  mining  companies  as  the  appraiser  considers 
this  in  a  uniform  manner  in  valuing  all  the  mines*  Taxes  are 
allowed  as  an  item  of  cost  but  royalties  are  not  allowed. 

Stock  Piles.  Mined  and  unmined  ore  are  now  treated 
practically  alike,  although  the  mined  ore  is  classed  as  person- 
alty. The  rate  on  real  estate  and  personal  property  is  the  same 
so  it  is  immaterial  to  the  mining  company  whether  the  ore  is 
taxed  in  the  stock  pile  or  in  the  mine  provided  it  is  not  sub- 
jected to  double  taxation.  On  December  31,  the  total  amount 
of  ore  in  the  mines  and  on  the  stock  pile  is  determined.  On 
April  2  following,  a  report  of  the  ore  in  the  stock  pile  is  filed 
and  any  increase  in  the  tonnage  reported  stocked  April  2,  as 
compared  with  the  tonnage  of  December  31,  is  deducted  from 
the  tonnage  in  the  mine  December  31,  so  that  the  mine  is  taxed 
on  the  total  tonnage  of  December  31. 

Inspection.  Mines  are  not  classified  or  grouped  except  in 
a  general  way  in  counties  or  districts  for  the  purpose  of  com- 
parison and  equalization  when  the  properties  are  of  the  same 


192  MINE  TAXATION   IN   THE  UNITED   STATES  [722 

character.  Mines  are  inspected  annually.  There  were  in  all 
132  valuations  in  1914.80 

Copper  mines.  The  copper  mines  were  included  in  the 
Finlay  valuation,  but  have  not  been  appraised  since.  It  is 
apparently  the  opinion  of  most  of  the  interested  parties  that 
the  copper  mines  have  generally  been  entered  upon  the  tax 
rolls  at  more  than  their  present  value.  Local  officials  have 
requested  the  Tax  Commission  to  appraise  these  mines  and  it 
seems  probable  that  when  the  mines  are  operating  under  normal 
•conditions  a  careful  appraisal  will  be  made.  The  Finlay  ap- 
praisal returned  the  mines  at  $69,000,000,  but  these  figures 
were  not  used.  In  1916  the  mines  were  rated  by  the  local  assess- 
ors and  boards  at  $80,000,000.  In  general,  the  copper  mines 
of  the  Lake  Superior  district  have  been  appraised  on  the  basis 
of  the  current  market  quotations  of  copper  stocks.  The  equali- 
zation for  1914  was  based  on  the  stock  quotations  for  April  13, 
1914.  Producing  dividend-paying  mines  were  valued  at  80.5 
percent  of  the  stock  valuation;  producing  but  non-dividend- 
paying  mines,  at  67  percent;  non-producing  and  non-dividend- 
paying  mines  at  53.6  percent.  It  was  found  that  the  dividend- 
paying  mines  were  returning  on  an  average  7.31  percent  in  the 
market  value  of  the  stock. 

For  1916  the  valuation  was  based  upon  the  average  stock 
quotation  throughout  the  year.  The  closing  bid  price  every 
Monday  was  used  in  determining  the  average  for  the  year  end- 
ing the  second  Tuesday  in  April,  1916.  For  the  year  mentioned 
the  producing  dividend-paying  mines  were  appraised  at  66 
percent  of  the  average  quotation,  the  producing  non-dividend- 
paying  mines  at  55  percent,  and  the  non-producing  properties 
at  44  percent. 

Coal  and  Other  Mines.  At  the  present  time  the  appraiser  of 
mines  does  not  place  a  value  upon  the  coal  mines,  salt  plants, 
and  other  mineral  properties.  The  figures  submitted  by  the 
appraiser  in  1911  for  the  coal  mines  have  not  been  placed  upon 
the  tax  roll.  The  practice  of  the  local  assessors  is  to  value  the 
plant,  but  generally  the  coal  rights  are  not  assessed. 

Mineral  Lands  and  Prospects.  Mineral  lands  are  no 
longer  classified  and  valued  by  the  commission  as  it  has  been 
found  impractical  to  apply  the  classification  from  year  to  year 
to  lands  whose  mineral  content  is  merely  speculative.  The  prob- 

80There  were  no  protests  by  any  mining  company  against  the  valua- 
tions for  1914. 


723]  PROBLEMS  OP  ADMINISTRATION  193 

lem  is  left  in  the  hands  of  the  local  officials  and  the  State  Tax 
Commission  intervenes  only  on  request  and  in  specified  in- 
stances when  protests  are  made  by  owners  of  speculative  mineral 
lands  against  valuations  made  by  local  assessors  and  boards 
of  review. 

Plant.  Surface  plant  and  improvements  used  exclusively 
for  mining  purposes  are  not  taxed  as  in  this  system  of  valuation 
no  value  is  attached  to  them.  Only  those  improvements  which 
are  directely  connected  with  the  mining  operations  are  exempt; 
stores,  houses,  hospitals,  etc.,  are  taxed.  A  mine  power-plant 
furnishing  power  only  to  the  mine  of  the  owner  is  not  taxed. 
In  the  case  of  a  mine  power-plant  located  outside  of  the  taxing 
district  in  which  the  mine  is  located,  the  power-plant  is  taxed 
as  a  power-plant  where  it  is  located,  but  the  valuation  of  the  mine 
in  the  other  district  is  reduced  by  the  amount  at  which  the 
power-plant  is  valued.  In  this  way  the  mine  operator  pays  no 
more  taxes  than  if  the  power-plant  were  located  contiguous  to 
the  mine.  A  mine  whose  power-plant  sells  power  is  permitted 
to  charge  itself  for  power  at  the  custom  rate,  but  the  power-plant 
is  then  taxed  as  if  it  were  not  owned  by  the  mine. 

Royalties.  Royalties  are' not  taxed  except  that  they  are  in- 
cluded in  profits  and  taxed  to  the  operators.81 

Local  Assessments.  The  local  taxing  units  in  the  iron  min- 
ing districts  use  the  valuation  of  the  tax  commission  whenever 
such  a  valuation  is  made.  When  the  local  officials  do  not  use  the 
commission's  valuation,  the  commission  may  ask  for  a  review. 
In  one  instance  this  was  done  and  the  proper  figures  were  thus 
insisted  upon  in  spite  of  the  apparent  unwillingness  of  the  local 
officials. 

Cost  of  Appraisal.  The  expense  of  the  annual  appraisal  of 
the  iron  mines  of  Michigan  including  the  pro  rata  expense  of 
administration  of  the  Michigan  Geological  Survey  is  approxi- 
mately eight  thousand  dollars.  The  valuation  of  these  mines 
January  1,  1914,  was  $92,090,349.  In  1913  the  valuation  was 
$82,534,221  and  the  mines  paid  taxes  amounting  to  $1,579,124.13. 
This  makes  the  cost  of  appraisal  $0.005067  per  $1000  of  taxes 
collected  and  $0.000097  per  $1000  appraised.  It  should  be  noted 
that  this  is  the  cost  of  appraisal  of  individual  mines  which  are 
inspected  annually. 

"According  to  the  Michigan  laws  of  1891  all  annuities  and  royalties 
are  taxed  as  personal  property.     (Laws  of  Michigan,  1891,  Act  No.  200). 


194  MINE  TAXATION   IN   THE  UNITED   STATES  [724 

Wisconsin 

Profiting  by  the  experience  of  Minnesota  and  Michigan,  Wis- 
consin, acting  through  the  Tax  Commission,  has  provided  for 
the  appraisal  of  the  mineral  properties  of  the  State  by  the  State 
Geological  Survey.  As  previously  noted  two  widely  different 
types  of  properties  are  being  operated,  namely,  the  iron  mines 
and  the  zinc  mines. 

IRON  MINES.  The  iron  mines  produce  only  two  percent  of 
the  Lake  Superior  iron  ore,  so  that  the  task  of  appraising  the 
iron  mines  is  a  small  one  when  compared  with  the  work  in  Min- 
nesota and  Michigan.  There  are  five  operating  iron  mines  on 
the  Gogebic  Range,  three  on  the  Menominee,  two  on  the  Baraboo, 
and  two  at  Mayville.  The  first  state  appraisal  of  mines  for  tax- 
ation was  made  in  1912,  the  methods  employed  being  somewhat 
similar  to  those  in  use  in  Michigan.  Owing  to  the  small  number 
of  operating  iron  mines  no  classification  has  been  employed  as 
each  mine  is  appraised  as  nearly  as  possible  upon  its  present 
value. 

At  first  in  estimating  the  value  of  a  mine  on  the  basis  of 
earnings  and  life,  the  interest  rate  was  taken  at  5  percent;  it 
is  now  taken  at  6  percent.  The  sinking-fund  is  figured  on  a  4 
percent  basis.  The  various  hazards  of  mining  are  considered  and 
deductions  of  from  10  to  15  percent  may  be  made  if  conditions 
justify.  The  Wisconsin  Tax  Commission  in  1912  decided  that 
mine  royalties  are  taxable  as  income  after  allowance  is  made 
for  depreciation.  Mine  owners  claimed  that  royalties  were  a 
depletion  of  the  original  capital. 

In  general,  except  at  Mayville  and  in  the  zinc  district  the 
effect  of  the  appraisal  by  the  Geological  Survey  has  been  to 
increase  the  valuation  of  the  mines.  In  one  instance  the  assessed 
valuation  was  increased  from  $45,000  to  $1,500,000.  The  local 
assessors  and  the  boards  of  review  have  generally  accepted  the 
valuation  of  the  Geological  Survey.  One  exception  has  been 
conspicuous ;  the  valuation  of  an  iron  mine  was  reduced  by  the 
Board  of  Review  from  $300,000  to  $75,000. 

ZINC  MINES.  The  zinc  mines  of  the  Platteville  district  pre- 
sented a  number  of  problems  which  had  not  arisen  in  the  ap- 
praisals in  Michigan  and  Minnesota.  The  Wisconsin  Geological 
Survey  made  a  careful  study  of  conditions  in  the  Platteville 
district  and  a  comprehensive  report  on  ' '  Method  of  Mine  Valua- 
tion and  Assessment"  with  special  reference  to  the  zinc  mines 


725]  PROBLEMS  OP  ADMINISTRATION  195 

of  southwestern  Wisconsin  was  prepared  by  Mr.  W.  L.  Uglow.82 

Part  I  of  this  report  discusses  carefully  the  conditions  in 
the  Platteville  district  which  have  an  important  influence  upon 
mining  costs,  operating  profits,  and  the  value  of  mining  prop- 
erty. Owing  to  the  type  and  the  extent  of  the  ore  deposits,  the 
life  of  the  individual  mine  is  generally  short  and  the  methods 
of  valuation  developed  in  the  iron-mining  districts  cannot  be 
applied  justly  without  the  introduction  of  many  factors  for  va- 
riations from  the  assumed  standard  conditions. 

It  was  found  that  prior  to  1913,  as  a  general  rule,  little 
increase  in  assessment  had  been  placed  upon  lands  on  account 
of  the  mineral  contained.  The  common  practice  in  the  district 
has  been  for  the  mining  operator  to  own  simply  a  lease,  and  the 
leasing  company  often  did  not  undertake  to  pay  any  taxes  with 
the  exception  of  those  on  income  and  personal  property. 

Estimating  Ore  Bodies.  In  estimating  the  value  of  a  drilled 
ore  body,  it  is  customary  for  experienced  operators  to  compute, 
from  a  map  showing  the  location  of  the  drill  holes,  the  actual 
area  underlaid  with  ore  and  to  determine  the  total  tonnage  of 
ore  that  may  be  expected  from  the  records  of  the  drilling.  In 
computing  the  value  of  the  product  of  the  mining  and  milling 
operations,  the  market  price  of  various  proportions  of  the  zinc, 
lead,  and  iron  minerals  must  be  considered  carefully.  In  spite 
of  the  painstaking  work  of  competent  engineers,  the  statement  is 
made  that,  "sufficient  mining  has  not  been  done  in  the  district 
on  well-drilled  ore  bodies  to  admit  of  a  reliable  set  of  average 
factors  for  mill  recoveries,  etc.  It  is  doubtful  if  such  a  set  of 
average  factors  will  ever  be  derived."88 

However,  mines  and  mineral  lands  are  bought  and  sold  on 
the  basis  of  drilling  and  it  is  logical  to  conclude  that  appraisal 
for  taxation  can  be  made  upon  the  same  data  with  a  degree  of 
accuracy  that  will  approximate  that  of  the  engineer  upon  whose 
estimates  the  valuations  for  sale  and  purchase  are  made. 

In  order  to  demonstrate  the  results  of  appraising  zinc  mines 
upon  different  bases,  Mr.  Uglow  assumed  a  "hypothetical  zinc 
mine."  The  assumptions  were  based  upon  the  actual  records 
of  eight  operating  mines.  The  hypothetical  mine  was  assumed 
to  have  a  definite  tonnage  of  ore  available  which  will  be  worked 
out  in  four  years.  Upon  the  basis  of  the  operating  costs  and 

82Bulletin  XLI,   Wisconsin  Geological  and  Natural  History  Survey, 
Madison,  1914. 
**Ibid.,  p.  16. 


196  MINE  TAXATION   IN   THE  UNITED   STATES  [726 

profits  of  mines  in  the  district,  the  profits  of  the  hypothetical 
mine  were  determined  for  each  year  of  operation.  Upon  these 
data  Mr.  Uglow  determined  the  assessed  value  of  the  hypothetical 
mine  under  the  (1)  ad  valorem  method,  (2)  the  Arizona  method, 
(3)  the  Colorado  method,  and  (4)  the  equated  income  method.8* 
Wisconsin  Method  for  Zinc  Mines.  The  actual  method  of 
appraisal85  employed  in  1914  in  the  Platteville  district  was  a 
modification  of  the  method  used  by  Mr.  J.  R.  Finlay  in  apprais- 
ing the  mines  of  Michigan  in  1911.  The  most  important  changes 
were  as  follows  :86 

1.  "In  properties  with  a  considerable  tonnage  of  ore 
drilled  out  and  assayed,  it  was  found  advisable  to  base  esti- 
mates of  future  grades  of  ore  on  this  drill-hole  information, 
viewed  of  course  in  the  light  of  past  production ;  and  not 
to  lay  too  much  stress  on  the  grades  of  ore  produced  in  the 
past. 

2.  In  the  smaller  properties  which  have  very  little 
probable  ore  in  sight  (and  consequently  an  estimated  short 
life)  and  no  drillings  in  advance  of  the  workings,  the  fore- 
cast of  future  production  was  based  almost  entirely  on  the 
production  of  the  past  year  or  fraction  thereof,  almost  re- 
gardless of  the  grades  of  ore  produced  previous  to  that  time. 

3.  It  was  assumed  (in  the  absence  of  information  to 
the  contrary)  that  each  ore  body  extended  200  feet  in  ad- 
vance of  each  ore  breast  or  the  last  drill  holes  in  ore,  with 
present  dimensions. 

4.  The  average  price  of  spelter  was  assumed  to  be  $5.15 
per  cwt.    The  average  price  to  be  expected  for  ore  of  any 
grade  for  purposes  of  this  calculation,  was  based  partly  on 
this  spelter  market,  and  partly  on  the  average  of  a  series  of 
ore  prices  obtained  from  several  operators  and  ore  buyers 
of  the  district. 

5.  The  cost  per  ton  of  dirt  used  in  the  calculation  was 
based  in  a  general  way  on  the  average  cost  obtained  from 
the  past  records  of  each  individual  mine.     The  appraiser, 
however,  did  not  hesitate  to  use  a  higher  or  lower  figure,  if, 
in  his  judgment,  this  was  demanded  by  conditions  liable  to 
be  met  with  in  the  near  future.    This  variation  became  of 

8*A  description  of  the  proposed  equated  income  method  will  be  found 
in  Chapter  VI,  p.  151,  and  Chapter  IX,  p.  243. 
85Uglow,  op.  cit.  p.  38. 
.,  pp.  38,  39- 


727]  PROBLEMS  OP  ADMINISTRATION  197 

considerable  importance  in  the  case  of  mines  with  a  probable 
life  of  a  year  or  less. 

6.  On  account  of  the  difficulty  of  estimating  future 
probable  profits  in  the  form  of  an  annuity,  and  on  account 
of  the  short  lives  of  the  mines,  the  table  of  strict  present 
values  given  by  Hurd's  Manual  was  used  instead  of  the 
Finlay  table. 

7.  A  six  percent  rate  of  interest  was  used. 

8.  Reductions  varying  from   10  to  15  percent  were 
made  from  the  valuations  thereby  obtained.    The  figure  used 
in  each  case  depended  on  the  judgment  of  the  appraiser  as 
to  the  probable  extent  of  unforseen  risk." 

Mining  properties  were  divided  into  four  classes  for  the 
purpose  of  valuation : 

(1)  Operating  mines,  which  were  making  a  profit  or  were  likely 
to  make  a  profit  on  a  $5.15  spelter  market. 

(2)  Mines  closed  down,  but  which  have  ore  reserves  not  likely  to- 
be  worked  at  a  profit  on  a  $5.15  spelter  market. 

(3)  Prospects  with  sufficient  tonnage  of  ore  drilled  to  warrant 
the  undertaking  of  mining  operations. 

(4)  Prospects  with  small  ore  bodies  drilled,  but  not  sufficiently 
large  at  the  time  of  assessment  to  insure  the  profitable  un- 
dertaking of  mining  operations. 

Valuations  were  placed  on  classes  (1)  and  (3)  but  not  on 
(2)  and  (4).87 

A  number  of  objections  to  this  method  of  valuation  have 
been  raised  but  none,  in  addition  to  those  previously  mentioned, 
has  been  offered  by  Wisconsin  operators  except  the  claim  that 
prices  of  zinc  ore  and  spelter  fluctuate  more  than  the  prices  of 
iron  ore  and  copper.  An  investigation  showed  that  this  claim 
is  not  warranted  by  statistics. 

The  system  ' '  implies  the  necessity  of  predicting  reserve  ton- 
nage, annual  production,  grades  of  ore,  costs  of  mining,  and 
future  ore  prices.  The  importance  of  these  difficulties  in  south- 
western Wisconsin  can  hardly  be  exaggerated."88 

Cost  of  Appraisal.  The  only  estimate  of  the  expenses  of 
appraising  the  mines  has  been  approximate  owing  to  the  small 
number  of  mines  and  the  fact  that  the  appraisers  have  been 
engaged  simultaneously  upon  other  work.  The  best  estimate  ia 
that  the  total  expense  does  not  exceed  $1500  per  annum. 

"Ibid.,  p.  40. 
**Ibid.,  p.  68. 


198  MINE  TAXATION   IN   THE  UNITED   STATES  [728 

Arizona 

The  Arizona  Tax  Commission  faced  the  task  of  formulating 
a  plan  for  the  appraisal  of  metal  mines  producing  copper,  gold, 
silver,  lead,  and  zinc.  As  previously  noted  the  mines  are  now 
taxed  upon  the  same  basis  as  other  property,  that  is,  under  the 
general  property  tax. 

"The  method  used  comprehended  a  four-year  average  net 
(proceeds),  based  upon  actual  operations,  a  classification  of  the 
properties  and  capitalization  at  different  factors  according  to 
the  class. 

Eight  classes  were  made  as  follows: 
Class  1.     Copper  mines  whose  ore  bodies  are  found  in  veins, 

fissures,  and  lenses,  and  do  not  show  evidence  of  exhaustion. 
Class  2.  Copper  mines  whose  ore  bodies  consist  of  porphyry 

deposits  and  large  acreages  of  contiguous  ground  largely 

unexplored  and  undeveloped. 
Class  3.     Copper  mines  whose  ore  bodies  consist  of  developed 

low-grade  porphyry  deposits. 
Class  4.     Copper  mines  whose  ore  deposits  show  evidences  of 

exhaustion. 

Class  5.     Gold  and  silver  mines  whose  ore  deposits  show  evi- 
dences of  exhaustion. 
Class  6.     Gold  and  silver  mines  whose  ore  bodies  have  not  shown 

evidence  of  exhaustion. 
Class  7.     Zinc  and  lead  mines. 
Class  8.     All  producing  mines  of  irregular  output. 
In    addition    to    these    eight    classes,    three    subdivisions    were 
made:    Subdivision  'A',  which  shall  include  all  such  properties 
as  have  entered  the  profitable  productive  stage  during  the  year 
1915;  also  so  as  to  contain  Subdivision  'B',  which  shall  include 
all  properties  that  have  suspended  profitable  production  during 
the  period  under  consideration,  for  reasons  other  than  market 
or  physical  conditions;  also  so  as  to  contain  Subdivision  *C', 
which  shall  include   all  such  properties  that  have  suspended 
profitable  production  when  said  properties  could  have  been  op- 
erated at  a  profit  during  the  period  under  consideration. 

The  net  earnings  of  classes  1,  2,  and  3  were  capitalized  at 
15  percent;  classes  4,  6,  and  7  at  20  percent;  class  5  at  25 
percent,  and  class  8  at  33%  percent. 

These  capitalizing  factors  were  considered  sufficiently  large 
to  take  into  account  all  amortization,  depreciation,  and  capital 
charges,  and  on  this  account  no  charges  for  these  items  were 


729]  PROBLEMS  OP  ADMINISTRATION  199 

allowed  against  the  net.    The  average  net  of  the  past  four  years 
was  used. 

The  total  assessment  of  productive  mines  amounted  to 
$212,301,620.55,  and  was  a  raise  of  $60,000,000.00  over  1915. 
Under  the  Colorado  law  it  would  have  been  about  $60,078,792.12. 
Under  the  law  of  New  Mexico,  Nevada,  Utah,  Idaho,  and  Mon- 
tana it  would  have  been  about  $81,415,310.76.  "88a 

Other  Western  Ore  Mining  States 

As  previously  noted,89  a  number  of  the  western  states  have 
either  levied  a  special  tax  upon  production  or  output  or  have 
applied  the  general  property  tax  rate  to  some  arbitrary  valua- 
tion of  mines.  This  is  in  effect  taxing  mines  upon  a  valuation 
which  is  assessed  or  determined  by  legislative  enactment  rather 
than  by  inspection  or  appraisal  at  true  cost  or  market  value. 
These  programs  of  assessment  usually  include  the  appraisal  of 
the  improvements.  In  many  instances  the  actual  value  of  the 
so-called  "improvement"  is  negligible.  In  the  following  discus- 
sion attention  will  be  directed  to  the  assessment  of  the  mine 
itself  and  no  further  reference  will  be  made  specifically  to 
improvements. 

The  special  methods  of  assessment  which  have  been  em- 
ployed recently  in  the  mining  districts  under  consideration 
include  the  following: 

1.  Gross  output  or  gross  proceeds. 

2.  Gross  proceeds,  less  certain  specified  items  of  expense. 

3.  Gross  proceeds  and  a  percentage  of  the  net  proceeds. 

4.  A  percentage  of  the  gross  plus  a  percentage  of  the  net 
proceeds. 

5.  Net  proceeds  or  a  percentage  of  the  net  proceeds. 

A  comparison  of  the  valuations  that  would  be  placed  upon 
an  operating  property  under  each  of  the  foregoing  programs 
demonstrates  how  widely  some  of  the  programs  are  separated. 

Mr.  Uglow  has  shown  for  a  hypothetical  zinc  mine  how 
widely  the  appraisal  under  several  programs  would  vary,  as 
follows : 

880Zander,  C.  M.    Assessment  of  mining  property  in  Arizona.    Bulletin 
of  National  Tax  Association,  1916,  II,  20. 
895w/>ra,  chap.  VII,  p.  156. 


200  MINE  TAXATION   IN   THE  UNITED   STATES  [730 

Present  value 

Standard  ad  valorem  method _ $250,000 

Colorado  method  „ 360,000 

Arizona  method90 580,000 

Equated  income  method,  using  actual  annual  profits...    350,000 

"     average     "  350,00090a 

The  actual  ratio  existing  between  the  assessed  valuation  and 
the  gross  production  of  the  metalliferous  mines  is  shown  in 
Table  No.  11,  prepared  by  Mr.  C.  M.  Zander.91 

It  is  important  to  note  that  any  system  of  appraisal  which 
considers  either  gross  or  net  proceeds,  or  both  in  any  ratio,  and 
which  does  not  consider  the  life  of  the  mine  misses  the  mark 
entirely  if  the  actual  value  of  the  property  is  the  basis  of  com- 
parison or  the  standard  set.  This  statement  is  made  under  the 
assumption  that  the  appraiser  has  simply  the  arbitrary  directions 
of  the  law  to  guide  him. 

CALIFORNIA.  In  reporting  to  the  County  Assessors  Associa- 
tion of  California  upon  his  procedure  in  appraising  mines,  Mr. 
C.  E.  Jarvis,  County  Assessor  of  Amador  County,  California, 
stated  that  he  divided  mining  property  into  four  classes,  namely, 
mining  locations,  patented  quartz  claims  undeveloped,  valuable 
patented  claims  temporarily  unworked,  and  producing  quartz 
mines.  He  pointed  out  the  difficulties  of  appraising  and  taxing 
unimproved  and  unpatented  claims,  suggesting  that  a  law  be 
enacted  authorizing  a  uniform  valuation  of  $100  per  claim.  All 
patented  quartz  claims  situated  on  the  Mother  Lode  or  main 
lode  are  valued  at  $500  while  claims  on  spur  lodes  are  valued  at 
$250.  The  valuation  of  an  idle  property  is  based  largely  on 
the  price  asked  for  such  a  property  by  the  owner.  The  valuation 
of  producing  mines  is  based  in  part  upon  the  report  of  produc- 
tion and  costs  secured  from  the  officers  of  the  mine.  If  the  mine 
is  not  profitable,  the  improvements  are  assessed  at  fifty  percent 
of  their  cost,  while  upon  the  claim  is  placed  a  value  that  "will 
encourage  further  development."  If  the  mine  is  earning  a 
profit,  the  improvements  are  assessed  at  fifty  percent  of  their 
cost.  Stamp  mills  are  assessed  at  $500  per  stamp.  Other  im- 
provements are  valued  as  carefully  as  possible.  The  mine  itself 

90As  employed  in  1913. 
90aUglow,  op  cit.,  Plate  X. 

91Zander,  C.  M.     Taxation  of  metalliferous  mines.     Proceedings  of 
National  Tax  Association,  1914,  VIII,  338. 


731] 


PROBLEMS  OF  ADMINISTRATION 


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202  MINE  TAXATION   IN   THE  UNITED   STATES  [732 

is  rated  at  125  percent  of  the  earnings  for  the  preceding  year.92 
In  1912,  California  mines  in  the  Mother  Lode  district  were 
paying  on  the  average  approximately  7.5  percent  of  the  gross 
receipts  in  taxes.93 

NEVADA.  The  experience  of  Nevada  in  dealing  with  the 
evasion  of  taxes  by  the  mining  companies  handling  the  ore  pro- 
duced through  subsidiary  milling  companies  has  already  been 
cited.  In  this  connection  it  is  interesting  to  note  that  in  1913 
the  accounts  of  a  large  corporation  show  that  the  net  earnings 
from  the  mine  amounted  to  $332,055.81  while  the  subsidiary 
milling  company  reported  net  earnings  of  $1,118,603.97.  The 
gross  value  of  the  ore  shipped  to  the  mill  was  $3,144,173.11.  An 
agreement  has  been  made  by  the  Nevada  Tax  Commission  and 
the  mining  companies  so  that  proper  charges  are  now  made  for 
milling. 

West  Virginia 

The  assessing  of  mineral  properties  in  West  Virginia  has 
developed  many  interesting  points  particularly  in  connection 
with  royalties,  leaseholds,  and  oil  and  gas  properties. 

Assessors  are  instructed  in  appraising  mineral  rights  as 
follows : 

"In  assessing  coal,  oil,  gas  and  other  lands  of  similar 
character,  you  should  constantly  bear  in  mind  that  the  fee 
simple,  or  what  is  commonly  known  as  the  '  royalty  interest, ' 
is  assessable  upon  the  land  books  as  a  part  of  the  body  of 
the  land,  while  the  'working  interest'  or  that  interest  in 
such  land  operated  by  the  'lessee'  is  assessed  upon  the  per- 
sonal property  books  under  the  head  of  'chattels  real'  or 
'leaseholds'. 

"The  royalty  interest  in  a  well-settled  producing  well 
is  worth  in  the  market  for  commercial  purposes  $1,250.  for 
each  barrel  of  oil  produced  every  twenty- four  hours;  while 
the  working  interest  is  worth  $1000  for  each  barrel  produced 
in  twenty-four  hours.  That  is,  on  a  tract  of  land  that  pro- 
duces 200  barrels  of  oil  per  day,  the  owner  of  the  royalty 
interest  of  one-eighth  the  production  receives  25  barrels  of 
oil  per  day,  and  his  interest  would  be  worth  $31,250 ;  while 
the  owner  of  the  working  interest,  who  receives  175  barrels 

92Mr.  Jarvis  favors  this  method  for  mines  generally,  but  suggests 
that  other  factors  must  be  employed  for  other  types  of  mines. 

93Jarvis,  C.  E.  Assessment  of  mining  properties.  Min.  and  Sci. 
Press,  1912,  CV,  210. 


733]  PROBLEMS  OP  ADMINISTRATION  20$ 

per  day,  could  sell  the  same  at  $100  for  each  barrel  produced 
in  twenty-four  hours  and  his  interest  would  be  worth  $175,- 
000.  The  difference  between  the  value  of  the  royalty  inter- 
ests and  the  working  interest,  based  upon  the  production, 
is  in  favor  of  the  royalty  interest,  the  reason  being  that 
there  is  no  expense  attached  to  the  production  of  the  royalty 
interest;  whereas,  there  is  more  or  less  expense  attached  to 
the  working  interest,  in  keeping  up  the  wells.  Thus,  in- 
stead of  valuing  B's  100  acre  tract  of  land,  as  per  example 
hereinabove  set  out,  at  $1,360.  per  acre,  experience  has  shown 
that  on  account  of  the  short  life  of  such  an  investment, 
$1,250.  per  barrel  for  every  barrel  received  as  royalty  in 
twenty-four  hours  would  be  a  fair  market  price  for  such 
interest,  which  would  be  for  oil  purposes  alone,  $31,250. 
for  the  100  acres  of  land,  or  $312.50  per  acre.  B's  100  acre 
tract  is  certainly  well  worth,  for  oil  purposes  alone,  $312.50^ 
per  acre,  when  you  consider  that  during  the  year  he  re- 
ceives as  royalty,  according  to  the  calculation  above  set  out, 
the  sum  of  $136.87  per  acre  per  annum.  The  working  inter- 
est in  said  tract  of  100  acres,  according  to  this  basis  of 
valuation,  would  be  worth,  and  would  sell  for  upon  the 
market,  $175,000.  which  interest,  if  the  lease  was  for  a  term 
of  years,  not  being  a  free-hold  estate,  would  not  be  charged 
upon  the  land  books  but  would  be  charged  upon  the  per- 
sonal property  books. 

"But  suppose  B  instead  of  leasing  his  100  acres  for  oil 
purposes  and  drawing  a  royalty,  is  the  operator  and  is  pro- 
ducing and  receiving  from  his  100  acres,  two  hundred  bar- 
rels per  day,  which  two  hundred  barrels  production  is 
worth,  and  would  sell  for  $200,000.,  then  would  not  his  100 
acre  tract  for  oil  purpose  alone  be  worth  $2,000.  per  acre? 
In  other  words  if  the  oil  wells  on  the  one  hundred  acres, 
are  producing  two  hundred  barrels  per  day,  not  being  en- 
cumbered by  a  leasehold,  and  could  be  sold  in  the  open  mar- 
ket for  $200,000.,  this  tract  of  land  for  oil  purposes  alone 
would  be  worth  the  price  of  $2,000.  per  acre."94 

It  is  suggested  that  for  gas  wells  the  annual  royalty  per 
well  be  capitalized  at  six  percent  and  this  amount  be  entered  on 
the  tax  rolls.95  But  if  the  life  of  the  gas  wells  in  the  community 

^Instructions  to  Assessors,  West  Virginia,  1910,  pp.  8,  i5,  16. 
9slbid.,  p.  19. 


204  MINE  TAXATION   IN   THE  UNITED   STATES  [734 

is  short  the  rate  should  be  increased  in  order  to  allow  for  the 
shorter  life. 

Kansas 

In  the  Kansas  coal  fields  the  practice  of  assessing  is  practi- 
cally as  follows: 

Where  the  fee  to  proved  coal  lands  is  entirely  in  one  person, 
it  is  assessed  at  $80  per  acre.  Mineral  reserves  owned  in  fee, 
separate  from  the  surface  ownership,  are  listed  at  $60  per  acre ; 
mineral  reserves  worked  out  or  not  proved,  $10  per  acre ;  mineral 
leases  on  proved  coal  land,  $40  per  acre ;  when  the  surface  owner 
has  leased  the  coal,  $20  per  acre  is  added  to  the  surface  value ; 
farm  land  adjoining  proved  coal  land  is  assessed  $5  in  addition 
to  the  surface  value.96 

Pennsylvania  Anthracite  Mines  and  Lands 
The  taxation  of  anthracite  mines  and  lands  has  attracted 
much  attention,  particularly  during  the  last  ten  years.  Prior 
to  1890,  the  assessors  in  valuing  anthracite  lands  returned  ap- 
praisals of  nominal  values  irrespective  of  the  coal  contents,  or, 
if  the  land  was  valued  on  account  of  the  coal  the  valuation  was 
low.  Following  1890  there  was  a  demand  among  tax  payers  in 
the  anthracite  fields  that  the  mining  companies  should  bear  a 
larger  part  of  the  tax  burden.  "An  effort  to  adjust  this  more 
equitably  evolved  assessment  by  the  foot-acre  of  coal  in  the 
ground — usually  reported  by  the  owner  or  operators,  occasionally 
under  oath,  as  an  average  thickness  spread  over  the  area  of  the 
lowest  bid.  The  valuation  placed  on  the  foot-acre  base,  while 
irregular  and  frequently  objectionable,  was  not,  up  to  1907, 
confiscatory,  and  the  taxes  assessed  were  paid  without  serious 
resistance.  In  1907,  stimulated  by  a  renewed  newspaper  agita- 
tion, great  advances  were  made  in  the  assessed  valuation,  still 
on  the  foot-acre  basis,  and  assessments  of  from  $60  to  $100  per 
foot-acre  were  imposed;  these  were  resisted  in  the  courts  and 
are  still  (1915)  in  litigation,  resulting  in  a  condition  of  almost 
intolerable  chaos.  Despite  court  rulings  reducing  the  assess- 
ments from  $40  to  $50  per  foot-acre,  the  valuations  have  been 
continuously  increased,  until  at  the  present  time  assessed  valua- 
tions of  from  $175  to  $300  per  foot-acre  are  attempted  to  be 
imposed.  In  the  tax  appeal  cases  tried,  sales  have  shown  prices 
varying  from  two  or  three  hundred  up  to  ten  thousand  dollars 
per  acre,  the  smaller  values  for  lands  containing  only  relatively 

"Correspondence,  Kansas  Tax  Commission. 


735]  PROBLEMS  OP  ADMINISTRATION  205 

thin  coal,  or  practically  exhausted;  medium  values  (from  two 
to  three  thousand  dollars  per  acre)  for  relatively  small  areas 
with  normal  coal  contents,  but  unopened  and  generally  not  of 
sufficient  area  for  separate  operations;  and  extreme  values,  in  a 
few  cases,  for  going  concerns,  or  for  lands  strategically  located 
and  thus  having  inflated  values  to  particular  purchases."97 

Mr.  Norris  considers  the  foot-acre  method  unfair  to  the 
mining  operator  because  no  allowance  is  made  for  lack  of  uni- 
formity in  the  quality  of  coal  and  also  for  the  greater  cost  of 
mining  of  thin  beds  as  compared  with  thick  beds.  Valuations 
on  the  basis  of  royalties  paid  at  the  present  time  have  failed 
to  consider  the  fact  that  much  of  the  coal  will  not  be  mined  for 
years,  and  that  royalty  value  is  not  the  true  present  value  for 
such  coal. 

In  1908  there  were  a  large  number  of  appeals  made 
by  the  owners  of  coal  properties  on  the  valuations  made  by  the 
assessors  of  coal  districts  in  Northumberland  County.  These 
valuations  had  been  adjusted  by  the  Commissioners  sitting  as  a 
Board  of  Review  and  when  the  County  Court  considered  the 
appeals,  it  proposed  that  a  Commission  be  appointed  "to  ascer- 
tain the  actual  cash  value  of  the  coal  properties  in  the  districts 
from  which  these  appeals  were  taken,  including  the  values  of 
properties  not  appealed  from  as  well  as  those  appealed  from, 
so  as  to  enable  the  court  to  fix  the  cash  value  of  properties  ap- 
pealed from,  which  is  necessary,  because  values  of  coal  properties 
are  largely  obtained  by  comparison  with  other  property  located 
in  the  district."  There  was  no  objection  raised  by  the  interested 
parties  and  the  Court  appointed  a  Commission  of  three  to  ap- 
praise the  coal  properties.  The  County  Commissioners  had  re- 
ported a  total  assessment  of  $11,130,557  for  coal  properties  in 
the  county.  There  had  been  nearly  one  hundred  appeals. 

The  Commission,  consisting  of  William  Griffith,  George  E. 
Stevenson,  and  Samuel  B.  Morgan,  was  appointed  on  March  4, 
1908  and  submitted  its  report  on  May  29,  1909. 

While  the  work  of  this  Commission  was  limited  to  one 
county  and  to  one  type  of  mineral  deposit,  it  is  particularly 
interesting  to  mining  engineers  and  tax  officials  on  account  of 
some  of  the  conditions  prevalent.  Some  of  the  coal  tracts  con- 
tained originally  all  of  the  sixteen  or  seventeen  veins  of  coal 
known  in  the  region.  The  character  and  thickness  of  coal,  dip 

97Norris,  R.  V.     The  valuation  of  anthracite  mines.    Proceedings  of 
International  Engineering  Congress,  1915- 


206  MINE  TAXATION  IN  THE  UNITED  STATES  [736 

and  depth  of  beds,  and  other  important  factors  affecting  mining 
varied  widely  over  the  district.  There  had  been  "no  sales  of 
coal  lands  in  Northumberland  County,  with  the  exception  of  one 
or  two  isolated  cases,  since  1872  or  1873.  No  sales  since  that 
time  throw  any  light  upon  the  value  of  the  coal  in  place"  and 
no  evidence  had  been  offered  as  to  the  holding  price  or  asking 
price  for  coal  lands  since  that  date. 

The  Commission  considered  the  experience  of  Luzerne  and 
Lackawanna  counties  and  the  decisions  of  the  courts  that  the 
foot-acre  method  could  not  be  legally  employed.  From  the  best 
data  available,  the  tonnage  of  coal  contained  in  each  tract  was 
calculated.  The  report  of  the  Commission  describes  the  pro- 
cedure as  follows:  "The  estimator  then  determines  what  he 
believes  from  all  of  the  evidence  he  has  found  in  the  course  of 
his  investigation  the  number  of  tons  per  foot-acre  the  property 
will  yield  on  final  mining,  after  making  all  reasonable  deductions 
and  allowances  for  uncertainties,  and  upon  that  tonnage  and  the 
probable  cost  of  mining  it,  he  bases  his  estimate  of  the  value  of 
the  tract."98 

The  total  valuation  of  coal  properties  in  the  county  was 
increased  by  the  Commission  from  $11,130,557  to  $12,539,753. 

The  Court,  after  making  a  few  changes,  adopted  the  report 
of  the  Commission.  The  mining  companies  appealed  to  the 
Supreme  Court  but  the  decision  of  the  lower  court  was  affirmed. 

According  to  the  Pennsylvania  Supreme  Court  decisions  the 
only  strictly  legal  method  of  valuation  is  that  based  on  actual 
sales.  Exception  has  been  taken  to  the  "foot-acre"  method,  to 
valuation  on  the  basis  of  royalty  values,  and  to  valuation  based 
on  the  capitalized  estimated  profits.98* 

In  Lackawanna  County,  by  agreement  between  the  County 
Commissioners  and  the  coal  mining  companies,  the  valuation  is 
based  upon  a  standard  of  $175  per  foot-acre.  In  Luzerne  County 
an  engineering  commission  for  the  county  assessors  fixed  the 
base  rate  at  $150  per  foot-acre.98b 

g*Ref>ort  of  the  Coal  Tax  Commission  of  Northumberland  County,  Pa., 
1907,  p.  38. 

98aSee  D.  L.  &  W.  R.  v.  Tax  Asssessor,  224  Pa.  240,  248-253,  (1909). 
Wilkes-Barre  Coal  Co.  v.  Assessor,  225  Pa.  272.  (1909).    Lehigh  &  Wilkes- 
Barre  Coal  v.  Luzerne,  225   Pa.  267,    (1909).     Mineral  R.  R.  &  Mining 
Co.  v.  Northumberland,  etc.,  229  Pa.  436-457,   (1911). 
Philadelphia  &  Reading  Coal  &  Iron  Co.  v.  Northumberland,  etc.,  229  Pa. 

460,  (1911). 

986Correspondence. 


737]  PROBLEMS  OP  ADMINISTRATION  207 

MINE  ACCOUNTING  AND  REPORTS  TO  TAX  COMMISSIONS 

In  order  to  secure  justice  among  the  mines  in  appraising 
for  the  purpose  of  taxation  it  is  obviously  necessary  that  uni- 
form methods  of  accounting  be  followed,  at  least  in  so  far  as  the 
accounts  affect  the  reports  filed  with  the  Tax  Commission.  In  a 
number  of  the  states  there  has  been  friction  due  to  irregularities 
in  accountancy.  The  laws  of  certain  of  the  western  states  are 
not  sufficiently  specific  in  the  statement  of  what  deductions  may 
be  made  from  gross  earnings  in  order  to  determine  the  net. 

It  is  possible  that  the  requirements  enforced  by  the  Federal 
internal  revenue  officers  in  connection  with  the  Federal  income 
tax  may  be  of  some  assistance  to  the  state  officials  in  prescribing; 
similar  rules  controlling  the  accounting  as  it  affects  the  records 
upon  which  the  state  appraisal  is  made.  Uniform  accounting; 
has  been  urged  by  the  state  associations  of  operators  in  several 
of  the  important  coal  mining  states  and  by  the  Federal  Trade 
Commission. 

The  tendency  of  the  tax  commissions  is  to  refrain  from 
interfering  in  any  way  with  the  private  records  of  the  operators 
so  long  as  the  data  requested  are  furnished  in  good  form  and  are 
found  to  be  accurate  and  complete.  The  recent  law  of  New 
Mexico  has  been  cited  previously."  The  Tax  Commission  is 
given  power  to  prescribe  the  method  of  keeping  accounts  of 
mine  companies.100 

In  determining  the  net  income  of  a  corporation  for  a  given 
year  on  which  it  is  subject  to  the  excise  tax  under  the  Act  of 
August  5,  1909,  the  corporation  is  entitled  to  a  "reasonable 
allowance"  for  depreciation  of  its  property.101  Under  such  pro- 
vision a  mining  corporation  engaged  in  extracting  ore  from  its 
mines  is  entitled  to  an  allowance  for  depreciation  equal  to  the 
value  in  place  of  the  ore  extracted  and  disposed  of  during  the 
year. 

REDEMPTION   OP   CAPITAL   AND   DEPRECIATION 

While  the  subject  of  depreciation102  of  mines108  had  pre- 
viously received  consideration,  the  enactment  of  the  Federal 

"Supra,  chap.  IV. 

100Lctws  of  New  Mexico,  1915,  chap.  LV,  sec.  2. 

101United  States  v.  Nipissing  Mines  Co.,  202  Fed.  803,  (1912). 

102See  Saliers,  E.  A.    Principles  of  Depreciation.    New  York,  1915. 

103Mr.  Finlay  uses  the  term  "depreciation"  as  meaning  current  con- 
struction costs.  He  says:  "By  depreciation  I  mean  current  construction 
costs ;  improvements.  Depreciation  means  literally  the  process  of  losing: 


208  MINE  TAXATION   IN   THE  UNITED   STATES  [738 

corporation  excise  tax  and  of  the  Federal  income  tax  focused 
attention  upon  this  phase  of  mining  finance.  Under  the  Federal 
income  tax  a  deduction  of  not  to  exceed  five  percent  of  the  gross 
value  of  the  output  at  the  mine  may  be  permitted,  but  this  de- 
preciation must  be  based  upon  the  actual  cost  of  the  properties 
containing  the  deposits.  Unearned  increment  will  not  be  con- 
sidered in  fixing  the  value  on  which  depreciation  shall  be  based. 
A  general  rearrangement  of  the  system  of  accounting  of  some 
of  the  large  companies  has  resulted  from  this  ruling.104 

value :  practically  it  means  the  exact  opposite ;  it  means  expenses  under- 
taken to  counteract  loss  of  value.  It  is  maintenance.  It  only  seems  not 
to  be  maintenance  because  the  items  that  compose  these  charges  have 
the  appearance  of  being  new  plant,  not  merely  replacements  of  old  plant." 
Cost  of  Mining,  p.  42. 

104The  following  quotation,  from  the  annual  report  for  1912  of  the 
JSIorth  Star  Mines  Co.,  illustrates  this  forcibly : 

"The  cost  price  of  the  mining  property  as  at  January  i,  1909,  when 
the  excise-tax  law  went  into  effect,  was  taken  as  $1,778,245,  which  dis- 
tributed among  1,039,871  tons  of  ore,  the  amount  estimated  to  have 
been  contained  in  the  mine  at  the  beginning  of  the  company's  operations 
in  1899,  gives  a  cost  rate  of  $1.71  per  ton.  The  application  of  this  rate  for 
the  period  up  to  January  1,1909,  on  the  464,871  tons  of  ore  then  milled, 
reduced  the  cost  value  of  the  mining  property  to  $983,316;  while  the  con- 
tinuation of  the  principle  through  the  years  1909,  1910,  1911  and  1912, 
according  to  the  tonnage  milled,  has  reduced  the  cost  value  of  the  original 
property  to  $336,420  on  which  depreciation  will  continue  at  the  rate  of 
$1.71  per  ton  until  the  balance  of  cost  price  is  extinguished.  In  making 
this  adjustment  of  the  original  cost  of  the  property  as  at  January  i,  1909, 
the  company  has  also  written  up  the  value  of  the  property  as  at  that  date, 
to  the  extent  of  $1,136,684  to  represent  with  the  remaining  cost  value  a 
fair  estimate  of  the  salable  value  of  the  mineral  contents  at  January  i, 
1909,  according  to  data  furnished  by  the  company's  engineers.  The  total 
amount  charged  against  property  account,  therefore,  on  January  i,  1909, 
•was  $2,120,000,  which  has  been  reduced  by  subsequent  allowances  for 
depreciation  as  above  stated,  to  the  sum  of  $1,473,104.  The  company  has 
been  inclined  to  hold  that  the  additional  value  written  up  to  property 
account  representing  unearned  increment  accrued  before  the  excise  tax 
went  into  effect  should  also  be  subject  to  an  allowance  for  depreciation ; 
but  the  present  ruling  of  the  Treasury  Department  is  not  favorable  to 
this  view." 

Another  interesting  complication  is  that  resulting  from  the  accounting 
methods  of  a  large  Nevada  Corporation.  The  estimated  average  cost 
per  ton  of  ore  to  the  company  for  its  entire  tonnage  was  found  to  be 
$16.36.  The  factors  employed  in  establishing  this  per-ton-unit  were  the 
mine  property  cost  and  the  estimated  total  tonnage  acquired  at  the  time 


739]  PROBLEMS  OF  ADMINISTRATION  209 

Corporations  leasing  oil  or  gas  territory  are  permitted  to 
base  depreciation  upon  the  cost  of  the  lease  and  not  upon  the 
estimated  value,  in  place,  of  the  oil  or  gas.  Operations  carried 
on  only  upon  a  royalty  basis  may  not  make  any  deductions  for 
depreciation. 

An  investigation  of  the  records  of  a  number  of  American 
mining  companies  demonstrated  that  sinking-funds  are  now  being 
established  in  order  to  replace  the  capital  invested. 

the  mine  was  purchased.  During  the  early  years  of  the  operations,  the 
best  ore  was  mined  at  a  considerable  profit.  By  the  time  the  Federal 
excise  corporation  tax  was  levied  practically  all  of  the  best  grades  of 
ore  had  been  mined  and  operations  were  being  continued  on  the  poorer 
grades  of  ore  which,  however,  were  returning  a  good  profit.  According 
to  the  regulations  of  the  Internal  Revenue  Department,  the  income  of  the 
company  might  be  determined  in  part  from  apparent  profits  measured  by 
the  net  recovery  per  ton  in  excess  of  the  estimated  cost  per  ton.  The 
accounts  of  the  company  showed  in  1912  that  the  net  realization  from 
operations  was  $11.75  per  ton  while  the  estimated  cost  per  ton  of  all  the 
ore  at  the  time  of  purchasing  the  mine  was  $16.36.  On  this  basis  the 
amount  written  off  for  depreciation  of  the  property  during  1912  exceeded 
the  net  earnings  by  $2,043,888.61.  During  the  calendar  year  of  1912,  the 
dividends  paid  aggregated  $5,694,636.80.  Under  the  present  Federal  income 
tax,  not  more  than  five  percent  of  the  gross  value  of  the  ore  may  be 
charged  to  depreciation. 


CHAPTER  VIII 

THE  TAX  BURDEN 

In  this  chapter  it  is  proposed  to  present  the  available  data 
showing  the  amount  of  taxes  paid  by  various  types  of  mining 
properties  and  to  compare  the  taxes  paid  per  unit  of  product 
by  mines  operating  under  the  different  tax  systems.  The  data 
used  have  been  secured  from  tax  commission  and  other  official 
state  reports,  United  States  census  reports,  annual  reports  of 
mining  companies,  and  by  correspondence  with  tax  officials  and 
mining  companies. 

Tables  No.  12  to  26  inclusive  are  based  upon  data  selected 
from  Volume  XI  of  the  Thirteenth  Census.  They  show  the  taxes 
paid  in  1909  by  the  mines  of  the  various  states. 

Table  No.  12  includes  data  on  the  value  of  the  product  of 
the  entire  mining  industry  of  each  state ;  the  total  cost  of  securing 
this  product,  but  not  including  taxes ;  the  surplus  above  operat- 
ing costs  before  taxes  are  paid;  and  the  total  amount  of  taxes 
paid  by  the  mines  in  each  state.  From  these  data  the  ratio 
between  the  amount  of  taxes  paid  and  the  surplus  above  operat- 
ing expenses  has  been  calculated  and  the  total  amount  of  the 
taxes  paid  is  given  as  a  percentage  of  the  surplus.  For  a  num- 
ber of  the  states  the  census  statistics  are  not  detailed  enough  to 
determine  this  percentage. 

Under  the  assumption  that  the  data  as  given  are  complete  or 
at  least  representative,  it  is  at  once  evident  that  the  ratio  of 
surplus  and  of  gross  earnings  to  taxes  varies  widely  among  the 
states.  If  the  data  for  the  twenty-one  leading  mining  states  are 
considered,  it  will  be  noted  that  the  percentages  of  surplus  paid 
as  taxes  range  from  3.56  to  12.78,  except  for  five  states  three  of 
which  are  above  this  range  and  two  below.  Examining  the  list 
of  sixteen  still  closer,  it  will  be  noted  that  nine  of  them  range 
from  3.56  to  6.44  percent  and  seven  from  8.01  to  12.78  percent. 
Each  group  includes  some  states  employing  the  general  property 
tax  and  states  using  a  system  of  taxing  output  or  earnings.  The 
aggregate  of  the  taxes  paid  in  1909  by  all  mines  in  the  United 
States  was  $17,796,793,  which  was  1.44  percent  of  the  reported 

210 


741] 


THE   TAX   BURDEN 


211 


TABLE  No.  12. 

TAXES    PAID    IN    1909    BY    THE    MINING    INDUSTRY    IN    THE    VARIOUS    STATES. 


State 

Value  of 
product  in 
dollars 

Expenses 
not 
including 
taxes  in 
dollars 

Surplus 
before 
taxes  are 
paid  in 
dollars 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

Alabama  

$  24,350,667 
34,217,651 
4,603,845 

63,382,454 
45,680,135 

1,375,765 
516,213 
8,846,665 

2,874,595 
8,649,342 
76,658,974 
21,934,201 
13,877,781 
18,722,634 
12,100,075 
6,547,050 
2,056,063 
5,782,045 
3,467,888 
67,714,479 
58,664,852 
31,667,525 
54,991,961 
322,517 
23,271,597 
1,308,597 
8,347,501 
5,587,744 
13,334,975 
1,358,617 
564,812 
63,767,112 
25,637,892 
1,191,512 
349,059,786 
897,606 

$  22,320,812 

33,265,197 
4,306,280 
60,624,729 
40,487,749 
1,140,834 
507,313 
5,839,039 
2,051,000 
7,040,618 

68,574,344 
20,177,422 
13,706,842 
15,720,064 
11,649,234 

6,574,054 
1,860,100 

4-917,598 
2,946,988 
50,775,178 
36,358,630 
27,585,678 
47,570,158 
259,635 
17,279,729 

1,199,715 
4,460,586 

5,513,013 
9,830,143 
Data  inc 
565,840 
53,064,983 
20,847,533 
Data  inc 
295,689,950 
670,534 

$  2,029,855 
952,454 
297,565 
2,757,725 
5,192,386 

234,931 
8,900 
3,007,626 

823,595 
1,608,624 
8,084,630 
1,756,779 
170,939 
3,002,570 
450,841 
-27,004 
195,963 
864,447 
520,900 
i6.939.30i 
22,306,222 
4,081,847 
7,421,803 
62,882 
5,991,868 
108,882 
3,886,915 

74,731 
3,504,832 
omplete 
1,028 
10,702,129 

4,790,359 
omplete 
53,369,836 
227,072 

f  185,578 

*  454,"9 
18,405 
626,456 
572,5H 
17,657 
1,624 

70,493 
13,236 
158,145 
287,641 
176,404 
43,855 
148,155 
96,354 
67,501 
16,241 

88,559 
40,187 
2,000,314 
2,851,143 
159,321 
456,191 
414 

257,476 
5,251 
47,354 
40,410 

174,389 

9.17 

47.68 
6.18 
22.80 
11.03 
7-52 
18.25 

2-34 
1.  60 

9-83 
3-56 
10.04 
25.66 
4.94 
21-37 

Arizona 

Arkansas  
California  .. 

Colorado.    

Connecticut 

Delaware 

Florida  

Georgia.-  _  

Idaho 

Illinois  .  . 

Indiana  

Iowa 

Kansas      .            .  . 

Kentucky  

Louisiana 

Maine  . 

8.29 
10.25 
7.72 
n.8l 
12.78 
3-90 
6.15 
.66 
4-30 
4.82 

1.22 

54-09 
4.98 

Maryland  

Massachusetts 

Michigan 

Minnesota       

Missouri. 

Montana 

Nebraska     

Nevada 

New  Hampshire.... 
New  Jersey    

New  Mexico  

New  York 

North  Carolina  
North  Dakota  
OHo  

4,300 
856,871 
308,497 

8.01 
6.44 

Oklahoma 

Oregon 

Pennsylvania.  
Rhode  Island.  

5,707,325 
3,343 

10.69 
1.50 

212 


MINE  TAXATION   IN   THE  UNITED   STATES 


[742 


TABLE  No.  12 — Continued. 

TAXES  PAID  IN   1909  BY  THE  MINING  INDUSTRY  IN  THE  VARIOUS   STATES. 


State 

Value 
of 
product 
in  dollars 

Expenses 
not 
including 
taxes 
in  dollars 

Surplus 
before 
taxes  are 
paid 
in  dollars 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

South  Carolina.^.... 
South  Dakota 

1,252,792 
6,4.^2.4.17 

1,024,040 

5.IQ6.QI4 

228,752 
1.2^5.50^ 

10,783 

IO5.25I 

4.71 
8.51 

Tennessee   _. 

I2.6O2.547 

1  1.071.728 

720.810 

Q4.Q2O 

11.17 

Texas 

10,742.  i  so 

8,26O,725 

2.481.425 

62.65^ 

2.  SI 

Utah  

22,083,282 

18,086,033 

^.QQI.24Q 

214.524 

5.87 

Vermont 

8.221.^2^ 

6,804  836 

I     4.16    4.8? 

72.645 

c.I-i 

Virginia 

8,7QS,646 

8,8l6,Q55 

incomplete 

I  50.  041 

Washington 

IO.5"*7,556 

8,57I.2O8 

1.066.148 

IO1.156 

5.26 

West  Virginia 

76,287,889 

7O,687.5O5 

5.600.  ^84 

07  1.  4O  5 

17.15 

Wisconsin  

7,450,404. 

5.55O.q8l 

I,  QO8,42  T, 

6l.6qi 

1-14 

Wyoming 

IO.572.l88 

9.174,  724 

I.IO7,864 

6l.7OI 

S.12 

value  of  the  product  and  8.33  percent  of  the  surplus  above  oper- 
ating expenses,  not  including  taxes. 

It  should  be  noted  that  these  percentages  of  surplus  paid 
in  taxes  must  not  be  compared  with  similar  percentages  for  other 
types  of  property  because  the  mining  percentages  have  been 
calculated  without  any  allowance  having  been  made  for  the 
redemption  of  the  capital  invested  in  the  mine.  As  previously 
noted  the  operation  of  the  mine  destroys  the  resources  of  the 
mine  and  proper  allowance  must  be  made  for  this  fact  whenever 
comparisons  are  made  between  the  taxes  paid  upon  mines  and 
the  taxes  upon  other  classes  of  property. 

TAXES  PAID  IN  THE   STATES   BY   ALL   MINES  PRODUCING   THE 
SAME  MINERAL 

In  Table  No.  13  are  given  data  for  the  coal  mines  of  the 
principal  coal  producing  states.  According  to  the  census  report 
the  mines  of  seven  of  the  states  were  operating  at  a  loss;  this 
conclusion  is  based  upon  the  statement  of  operating  expenses 
(including  taxes)  and  of  receipts  from  the  sale  of  the  product. 
In  two  additional  states  the  percentage  of  surplus  going  into 
taxes  was  over  forty,  although  the  total  tax  paid  was  $234,021 


743] 


THE   TAX   BURDEN 


213 


for  one  state  and  $83,020  for  the  other.  The  range  in  per- 
centage of  surplus  paid  in  taxes  was  from  3.06  for  Washington 
to  53.89  for  Ohio.  In  those  states  in  which  coal  mines  were 
being  operated  at  a  loss  the  tax  burden  was  of  course  greater 
than  the  burden  in  Ohio. 

Most  of  the  coal  mining  states  tax  coal  mines  on  an  ad 
valorem  basis.  Oklahoma  taxed  on  output,  but  the  census 
showed  the  Oklahoma  mines  to  be  operating  at  a  loss.  Utah 

TABLE  No.  13.  • 

TAXES   PAID   BY  COAL   MINES   IN    1909,    BY   STATES. 


State 

Value 
of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus; 
paid  in 
taxes 

Alabama.-  

$18,459,433 
3,508,590 
15,782,197 
53,030,545 
15,018,123 
12,682,106 

9,835,614 
10,003,481 

4,483,137 
3,175,102 
5,881,034 

5,117,444 
3,984,660 
563,212 
27,353,663 
6,185,078 
225,026 
147,466,417 

148,957,894 
6,688,454 
3,136,004 
4,111,987 
4,988,328 
9,226,793 
46,929,592 
9,721,134 

$  16,728,987 
3,620,276 
14,146,369 
51,525,922 
14,823,601 
12,781,252 

9,759,903 
10,104,003 
3,621,504 

2,971,363 
5,708,816 

4,550,956 
3,247,954 

5I9,H5 
26,919,476 
6,498,852 
235,604 
125,816,488 

131,567,747 
6,810,500 

2,799,739 
3,162,396 
5,169,688 
6,447,680 
44,984,598 
8,090,357 

$  1,730,446 
-111,686 
1,635,828 
1,504,623 
194,522 
-  99,146 
75,7" 
-100,522 
621,504 
203,739 
182,218 
566,488 
736,706 
44,o67 
434,187 
-313,774 
-  10,578 

2  1  ,649,929 

17,390,147 
-122,046 
336,265 

949,591 
-181,360 

2,779,113 

6,944,994 
1,630,577 

$    139,448 
10,250 
133,126 

171,582 
83,230 
38,484 
18,394 
67,946 
79,726 

14,439 
6,911 
33,7i8 
27,071 
4,265 
234,021 

36,589 
2,642 

2,344,575 
2,677,853 

48,704 
12,340 
55,i83 
117,232 

85,484 
485,161 

55,969 

8.06 

Arkansas 

Colorado 

8.14 
11.40 
42-79 

Illinois  

Indiana 

Iowa 

Kansas  

24-29 

Kentucky   . 

Maryland    . 

12.83 
7.09 
3-79 
5-95 
3-67 
9,68 

53.89 

Michigan      

Missouri. 

Montana 

New  Mexico  

North  Dakota.-  
Ohio 

Oklahoma 

Oregon 

Pennsylvania  Bit. 
Anth. 
Tennessee 

10.83 
15-39 

Texas  

3-67 
5-81 

Utah 

Virginia 

Washington 

3-08 
24.25 
3-43 

West  Virginia  
Wyoming           .    . 

214 


MINE  TAXATION   IN   THE  UNITED   STATES 


[744 


TABLE  No.  14. 

TAXES   PAID   BY  COPPER   MINES   IN    1909,    BY   STATES. 


State 

Value 
of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

Arizona 

$  31,614,116 
10,104,373 
416,086 
30,165,443 
45,960,517 
4,946,369 
36o,394 

8,843,099 

$  24,979,482 
7,701,231 
300,866 
23,508,650 
37,678,032 
2,294,347 

$  6,634,634 
2,403,142 
115,220 
6,656,793 
8,282,485 
2,652,022 

$  404,046 
48,003 

9,674 
950,821 

395,577 
26,789 
6,158 

66,190 

6.09 

2.  02 
8.42 
14.28 
4.78 
I.OI 

California 

Idaho         

Michigan  

Montana 

Nevada 

New  Mexico     .  .. 

"Tennessee  

Data  inc 

omplete 
2,082,984 

3-i8 

Utah 

imposes  taxes  upon  net  proceeds,  and  the  mines  in  1909  paid 
taxes  amounting  to  5.81  percent  of  the  surplus  above  operating 
•expenses.  Montana,  taxing  in  a  similar  manner,  took  5.95  per- 
cent of  the  surplus.  According  to  the  statistics  given,  the  an- 
thracite industry  of  Pennsylvania  paid  15.39  percent  of  the 
surplus  in  taxes,1  while  the  bituminous  mines  paid  10.83  per- 
cent. Data  for  individual  mines  do  not  correspond  closely  with 
these  results  obtained  from  the  census  statistics. 

Taxes  paid  by  all  of  the  copper  mines  in  each  of  the  im- 
portant copper  mining  states  are  given  in  Table  No.  14.  Owing 
to  the  fact  that  the  mines  of  a  number  of  important  copper 
mining  districts  produce  gold  and  silver  as  by-product,  the  sta- 
tistics given  are  not  absolutely  correct  as  showing  the  tax  bur- 
den upon  the  copper  produced.  It  is  generally  conceded  that 
the  copper  mines  of  Michigan  are  assessed  in  excess  of  their 
actual  value.  The  taxes  paid  in  1909  by  the  copper  mines  of 
Michigan  were  14.28  percent  of  the  net  and  3.15  percent  of  the 
gross  receipts.  In  none  of  the  other  important  copper-produc- 
ing states  did  the  taxes  amount  to  more  than  6.1  percent  of  the 
net. 

The  percent  of  surplus  paid  in  taxes  by  iron  mines,  as 
exhibited  in  Table  No.  15,  does  not  vary  much  among  the  states 

1The  anthracite  tax  of  two  and  one-half  percent  was  not  levied  until 


745] 


THE   TAX   BURDEN 


215 


TABLE  No.  15. 

TAXES   PAID   BY   IRON   MINES   IN    lOXXJ,   BY   STATES. 


State 

Value 
of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

Alabama  

*    4.939,149 
331,178 

44,341 
32,168,133 

57,076,135 
203,849 
1,651,091 
3,095,023 
24,419 
789,296 
815,181 
Data  inc 
100,844 
1,683,003 
2,972,584 
Data  inc 

^    4,587,233 
301,464 
Data  inc 

40,524 
22,509,066 
34,841,579 
150,020 

1,314,565 
2,066,776 
22,312 
358,168 
827,815 
omplete 
184,927 
1,494,678 
1,751,885 
omplete 

*     35i,9i6 

29,714 
omplete 

3,8i7 
9,659,067 
22,434,556 
53,829 
336,526 
1,028,247 
2,107 
431,128 
-12,134 

*     37,051 
3,065 

10.53 
10.32 

Georgia  

Iowa  

Maryland   ... 

582 
949,945 
2,653,794 
810 

7,350 
5i,49i 
389 
19,415 
6,863 

15-25 
9-83 
11.83 

i.5i 
2.18 

5-oi 
18.46 
4-5i 

Michigan    

Minnesota 

Missouri  . 

New  Jersey  

New  York  

Ohio 

Pennsylvania.—  
Tennessee  

Texas 

Utah 

-  84  083 

502 
16,565 
46,710 

Virginia  

188,325 
1,220,699 

8.80 
3-83 

Wisconsin 

Wyoming 

producing  important  quantities  of  iron  ore.  Only  three  states 
produced  more  than  four  million  tons  per  annum,  namely,  Min- 
nesota, Michigan,  and  Alabama.  The  percentages  paid  in  taxes 
in  1909  were  9.83,  11.83,  and  10.53  respectively.  The  percent- 
age paid  by  the  iron  mines  in  other  states  was  as  a  rule  much 
lower,  as,  New  Jersey,  1.51  percent;  New  York,  5.01  percent; 
Pennsylvania,  4.51  percent;  and  Wisconsin,  3.83  percent.2 

The  census  data  on  the  deep  gold  and  silver  mines  are  not 
conclusive,  as  much  gold  and  silver  is  produced  as  a  by-product 
in  the  mining  of  copper  and  lead.  Practically  the  only  states 
for  which  the  data  can  be  used  are  South  Dakota  and  California) 
In  the  former  the  percentage  of  the  surplus  paid  in  taxes  was 
7.34,  while  in  the  latter  it  was  35.43.  The  available  data  are 
given  in  Table  No.  16.  Statistics  on  gold  placers  are  given  in 
Table  No.  17.  California  is  the  principal  state  in  this  group, 

2Since  1009  the  taxes  of  the  iron  mines  in  a  number  of  these  states 
have  been  increased  greatly. 


216 


MINE   TAXATION   IN   THE  UNITED   STATES 


[746 


TABLE  No.  16. 

TAXES  PAID  BY  GOLD  AND  SILVER  MINES  IN  IQOQ,  BY  STATES  (Deep  mines  only). 


State 

Value 
of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

Arizona.  

$    2,170,627 

$    2,755,217 

$  —585,590 

$     26,176 

California.  

9,690,956 

9,344,688 

346,268 

122,656 

35.43 

Colorado 

Data  inc 

omplete 

Idaho 

7,026,602 

6,410,546 

1,487,058 

141,217 

0.61 

Montana   

1,002,128 

2,078,814 

21,514 

I7.1OQ 

73.63 

Nevada.  

17,807,945 

11,391,815 

6,416,130 

212,663 

3.32 

New  Mexico 

625,626 

1.118.740 

—40^,114 

4.111 

Oregon 

468.712 

575,607 

-106,965 

4.O27 

South  Carolina 

8,550 

•21,  ^H 

—  22,761 

62A 

South  Dakota  

6,120,970 

4,744,624 

1,176,146 

IOI,O25 

7-34 

Utah 

8,541,522 

5,080.178 

2,661,144 

84,125 

3.16 

Washington 

156,227 

2,855 

TABLE  No.  17. 

TAXES   PAID   BY   GOLD   PLACERS   IN    1909,    BY   STATES. 


Surplus 

Percent 

Value 

Expenses 

before 

of 

State 

of 

not 

taxes 

Taxes 

surplus 

product 

including 

are 

paid 

paid  in 

taxes 

paid 

taxes 

California 

$8.751.012 

$     5.517.855 

$1.211,177 

$     91,000 

2.82 

Colorado  

448,586 

248,521 

200,065 

13,111 

6.56 

Georgia 

10.611 

18,011 

702 

1,100 

Idaho  

22O.741 

211.604 

-  12,861 

4,882 

Montana  

5O2.651 

108,296 

104,  157 

4,988 

4.78 

Nevada 

62  652 

80,8  52 

-  l8,2OO 

14O 

North  Carolina  

57,319 

53,755 

3,564 

500 

14.03 

Oregon  „ 

I  50.OO2 

117,550 

4T./M1 

3,238 

7.81 

Utah  _. 

4.178 

4.060 

III 

IOO 

Washington 

37OO 

11.667 

11 

28 

747] 


THE   TAX   BURDEN 


217 


the  percentage  of  surplus  in  taxes  in  1909  having  been  2.82. 

It  is  difficult  to  secure  data  for  the  lead  and  zinc  industry 
by  states  as  many  mines  produce  lead  and  zinc  with  other 
metals.  The  only  important  lead  and  zinc  states  for  which  data 
were  given  were  Wisconsin  and  Missouri.  In  the  former  1.14 
percent  of  the  surplus  was  paid  in  taxes;  in  the  latter,  3.62 
percent. 

Table  No.  19  presents  statistics  for  the  petroleum  and  natu- 
ral gas  industries  in  the  various  states.  In  only  one  state  was 
the  percent  of  surplus  paid  in  taxes  over  9.01  percent.  In  West 
Virginia  it  was  12.15.  In  the  eleven  states  for  which  data  are 


TABLE  No.  18. 

TAXES   PAID   BY   LEAD   AND   ZINC   MINES   IN    1 909,    BY   STATES. 


State 

Value 
of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

Arkansas 

$         34,810 

*         39,365 
Data  inc 
Data  inc 
212,905 
Data  inc 
1,066,345 
18,996,787 
Data  inc 

46,947 
Data  inc 
Data  inc 
660,718 
Data  inc 
Data  inc 
1,611,795 

$   -    A.SSS 

$          218 

Colorado  

omplete 
omplete 

79,548 
omplete 
6,805 
3,568,741 
omplete 
21,827 
omplete 
omplete 

35,517 
omplete 
omplete 
378,112 

Idaho  

Illinois 

292,453 
6,779 
1,059,540 
22,565,528 

232 

.29 

Iowa  

Kansas 

1,193 
129,138 

Missouri— 

3.62 

Montana  

Nevada.-  . 

68,774 

425 

1-95 

New  Jersey 

New  Mexico 

Oklahoma 

695,235 

3,100 

8.73 

Tennessee.  

Utah 

Wisconsin.  

1,989,907 

• 

4,308 

1.14 

218 


MINE  TAXATION   IN   THE  UNITED   STATES 


[748 


TABLE  No.  19. 

TAXES    PAID    IN     IQOQ    BY    PETROLEUM    AND    NATURAL    GAS    PRODUCERS,     BY 

STATES. 


State 

Value 
of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

Arkansas 

$       126,400 
29.310,335 
317,680 
18,895,815 
3,224,619 
6,681,780 
892,281 

$       155,262 
24,933,418 
319,990 
13,403,946 
2,410,223 
3,896,229 
555,420 
Data  inc 

14,734 
1,494,031 
20,647,897 
12,689,260 

21,447,544 
4,242,605 

24,528,735 
156,377 

$  -  28,862 

4,376,917 
-    2,310 
5,491,869 
814,396 

2,785,551 
336,86i 

omplete 

-    3,279 
1,174,962 
8,973,062 
4,995,832 
17,719,931 
2,148,708 

3,659,352 
-137,448 

$        1,768 
276,669 
8,140 
72,107 
73,362 
122,230 
22,488 

California  

6.32 

Colorado 

Illinois 

1.32 
9.01 

4-39 
6.65 

Indiana..  _  

Kansas 

Kentucky  _  ..    .    . 

Louisiana  

Missouri. 

11,455 
2,668,996 
29,620,959 
17,685,092 
39,197,475 
6,391,313 
28,188,087 
18,929 

52 

64,657 
585,542 
261,631 
521,436 
43,958 
476,343 
284 

New  York 

5-50 
6-53 
5-24 
2.94 
2.05 
12.15 

Ohio  :  

Oklahoma.  
Pennsylvania.  ._  
Texas  

West  Virginia  
Wyoming  

available,  the  oil  and  gas  wells  in  three  states  paid  less  than  3 
percent  in  taxes,  and  six  of  the  others  paid  between  4  and  7 
percent. 

In  the  states  producing  phosphate  rock  the  percent  of  sur- 
plus paid  in  taxes  ranged  from  2.27  to  3.84.  The  available  data 
are  given  in  Table  No.  20. 

According  to  the  census  statistics  given  in  Table  No.  21 
the  percent  of  surplus  paid  in  taxes  in  the  gypsum  mines  varied 
widely  among  the  states.  In  three  states  it  was  between  1  and 
1.5  percent;  in  four  states,  between  4.75  and  6  percent;  in  two/ 
states  between  8.5  and  9  percent;  in  one  state  17.53  and  in  an- 
other 22.43  percent.  Data  on  the  quarrying  industry  are  given 
in  Tables  No.  22  to  26  inclusive. 


749] 


THE   TAX   BURDEN 


TABLE  No.  20. 

TAXES   PAID   IN    1909   BY   PHOSPHATE   MINES,    BY   STATES. 


Surplus 

Percent 

Value 

Expenses 

before 

of 

State 

of 

not 

taxes 

Taxes 

surplus 

product 

including 

are 

paid 

paid  in 

taxes 

paid 

taxes 

Florida 

$    8,488,801 

$     5.527.14.0 

$  2,961,661 

$     67,118 

2.27 

South  Carolina  

862,409 

'             *Jl  \J        I    *        " 

666,577 

195,832 

7,512 

/ 

3.84 

Tennessee 

1,395,942 

I,"3,ii9 

282,823 

9,670 

3-42 

TABLE  No.  21. 

TAXES   PAH)   IN    IOO9   BY  GYPSUM   MINES,    BY   STATES. 


Surplus 

Percent 

Value 

Expenses 

before 

of 

State 

of 

not 

taxes 

Taxes 

surplus 

product 

including 

are 

paid 

paid  in 

taxes 

paid 

taxes 

California. 

$101.845 

$       118,000 

$       14.164 

$          838 

5.92 

Colorado  .  ...^ 

Data  inc 

omplete 

Iowa  

669,711 

485,587 

184,144 

2,044 

I.  II 

Kansas 

118,678 

284,264 

14,414 

2,935 

8.53 

Michigan      

1,220,321 

1,032,888 

187,433 

9,748 

5.20 

Nevada  „ 

278,243 

263,881 

14,362 

2,517 

17.53 

New  Mexico.  

106,964 

91,662 

15,302 

88  1 

5-76 

New  York  

1,048,401 

911,219 

137,184 

6,495 

4.73 

Oklahoma  

417,594 

397,128 

20,466 

4,592 

22.43 

Texas  

387,739 

358,478 

29,261 

2,609 

8.92 

Utah.  „. 

81.4.01 

62,223 

19,270 

113 

1.62 

Wyoming  

132,719 

114,661 

18,058 

258 

1-43 

220 


MINE   TAXATION   IN   THE  UNITED   STATES 


[750 


TABLE  No.  22. 

TAXES   PAID   IN    1909   BY   GRANITE   QUARRIES,   BY   STATES. 


State 

Value 
of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

California           

$    1,518.916 
78,865 
617,667 
453,284 
852,610 

$    1,216,361 
79,058 
544,188 

447.584 
680,249 
Data  inc 
1,584,420 
480,505 
1,943,710 
465,847 
123,563 
Data  inc 

1,048,559 
52,337 
382,934 
755,541 
59,502 
128,654 
485,354 
670,534 
175,788 
18,971 
ni,458 
20,800 
2,291,208 
368,113 
574,841 
1,281,689 

$     302,555 
193 

73,479 
5,700 
172,461 
omplete 
I77,38i 

75,971 
242,276 
207,057 

32,154 
omplete 

157,252 

7,837 
61,501 

ii,390 

787 
23,567 
117,735 
227,072 

-    9,078 
4,217 
23,763 
7,825 
538,314 
105,231 
164,266 
151,416 

$       9,158 
383 
3,317 
1,149 
2,056 

3-03 

Colorado  

Connecticut  

4-53 
20.16 
1.19 

Delaware  

Georgia 

Idaho 

Maine         

1,761,801 
556,476 
2,185,986 
672,904 
155,717 

13,263 
2,619 
29,920 
2,006 
1,237 

747 
3-45 
12.42 

•97 
3.85 

Maryland  

Massachusetts—  
Minnesota  

Missouri             .    . 

Montana  

New  Hampshire.... 
New  Jersey  

1,205,811 
60,174 

444,435 
766,931 
60,289 
152,221 
603,089 
897,606 
166,710 
23,188 
135,221 
28,625 
2,829,522 

473,344 
739,107 
1,433,105 

4,526 

34 
2,161 
2,918 

455 
2,029 

4,545 
3,343 
1,415 
3 
486 

47 
I4,7H 
2,046 

2,750 
6,225 

2.88 
•43 
3-5i 
.26 
57-81 
8.61 
3-86 
1.47 

New  York 

North  Carolina  
Oklahoma  .  _  

Oregon  

Pennsylvania.  
Rhode  Island  
South  Carolina  
South  Dakota  
Texas  

2.05 
.67 
2-73 
i-95 
1.67 
4.11 

Utah  

Vermont  

Virginia  

Washington  
Wisconsin  „ 

751] 


THE   TAX   BURDEN 


221 


TABLE  No.  23. 

TAXES   PAID   IN    IQOQ   BY  LIMESTONE   QUARRIES,    BY   STATES. 


State 

Value 

of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

Alabama 

$       599,353 
112,468 
368,486 
331,408 
29,027 
15,080 

3,977,359 
3,616,696 
499,665 
807,463 
851,875 
143,258 
795,286 

641,344 
2,027,902 
154,064 

322,517 
180,604 
2,656,142 

3,363,149 
487,883 

4.733,819 
417,506 

312,413 
190,825 
I7,58o 
3°o,438 
835,498 
842,116 
21,700 

$       553,284 
103,830 
305,178 
3H,i4i 
33,926 

12,337 
2,861,237 
2,847,812 
369,658 
666,531 
635,325 
49,735 
674,447 
517,933 
1,642,270 
114,388 

259,635 
163,688 
2,092,718 
2,687,650 
378,512 
3,950,054 

355,517 
246,570 
157,588 
12,888 
263,138 
615,768 
642,865 
16,479 

$     146,069 
8,638 
63,308 
17,267 
-    4,899 
2,743 
1,116,122 
768,884 
130,007 
140,932 
216,450 

93,523 
120,839 

123,411 
385,632 
39,676 
62,882 
16,916 
563,424 
675,499 
109,371 

783,765 
61,989 

65,843 
33,237 
4,698 
37,300 
219,730 
199,251 

5,221 

$       2,284 
701 
1,301 
1,  80  1 

509 
650 
21,702 
18,932 
2,679 
2,736 
3,062 

374 
10,879 
6,922 
10,900 

423 
414 
189 

18,934 
24,276 

M5i 
19,724 
I.I77 
710 

524 
247 
1,740 

1,875 
3,864 

245 

4.96 

8.12 

2.06 
10.43 

Arkansas 

California  _    

Colorado  

Florida  

Georgia  _ 

23.70 
1.94 
2.46 
2.06 
1.94 
1.41 
.40 
9.01 
5-6i 
2.83 

I.OI 

.66 

6.12 

3-36 
3.60 
1.05 
2.52 
1.90 
i.  08 
1.58 
5-26 
4.67 

•85 
1.94 
4.69 

Illinois 

Indiana  

Iowa  

Kansas  _  

Kentucky  . 

Maryland  

Michigan  

Minnesota 

Missouri. 

Montana    

Nebraska  

New  Jersey 

New  York         

Ohio  

Oklahoma 

Pennsylvania.-  
Tennessee  

Texas  

Utah    . 

Vermont.  

Virginia  

West  Virginia  
Wisconsin.    _  

Wyoming 

Before  passing  to  a  consideration  of  the  taxes  paid  by  indi- 
vidual mines,  attention  may  be  directed  to  a  comparison  between 
the  taxes  paid  in  the  same  state  by  different  divisions  of  the 
mineral  industry. 


222 


MINE  TAXATION  IN   THE  UNITED   STATES 


[752 


TABLE  No.  24. 

TAXES   PAID   IN    1909    BY   MARBLE   QUARRIES   IN   THE  LEADING   STATES. 


Surplus 

Percent 

Value 

Expenses 

before 

of 

State 

of 

not 

taxes 

Taxes 

surplus 

product 

including 

are 

paid 

paid  in 

taxes 

paid 

taxes 

Georgia 

$       767,  140 

$         ^21.751 

$     44^,508 

$        1,678 

.18 

Massachusetts  ...  . 

252,  S57 

220,832 

"U.72S 

1.084 

6.2S 

New  York  

•^44,98  1 

303,813 

41,168 

2,878 

6.  QQ 

Tennessee 

611.741 

481,182 

172.  55Q 

2  Q74. 

2.21 

Vermont  ... 

3,277,651 

2,547,573 

730,078 

50,660 

6.94 

The  mineral  industry  of  California  paid  as  taxes  22.8  per- 
cent of  the  surplus.  The  copper  mines  paid  2.02  percent ;  the 
deep  gold  mines,  35.43  percent;  the  placer  mines,  2.82  percent; 
the  petroleum  and  natural  gas  wells,  6.32  percent;  the  granite 
quarries,  3.03  percent ;  the  limestone  quarries,  2.06  percent ;  and 
the  sandstone  quarries,  10.74  percent. 

In  Illinois,  the  mining  industry  paid  taxes  amounting  to 
3.56  percent  of  the  surplus.  The  coal  mines  paid  8.14  percent ; 
the  petroleum  and  natural  gas  wells,  1.32  percent ;  and  the  lime- 
stone quarries,  1.94  percent. 

In  Indiana,  the  entire  mining  industry  paid  10.04  percent 
in  taxes ;  the  coal  mines,  42.79  percent ;  the  petroleum  and  natu- 
ral gas  wells,  9.01  percent;  and  the  limestone  quarries,  2.46 
percent. 

In  Michigan,  the  mineral  industry  paid  taxes  amounting  to 
11.01  percent  of  the  surplus.  The  coal  mines  paid  7.09  percent; 
the  copper  mines,  14.28  percent;  the  iron  mines,  9.83  percent; 
the  gypsum  mines  and  plants,  5.20  percent;  and  the  limestone 
quarries,  9.01  percent. 

In  Ohio,  coal  mines  paid  taxes  amounting  to  53.89  percent 
of  the  surplus;  the  petroleum  and  natural  gas  wells,  6.53  per- 
cent; while  the  mineral  industry  of  the  entire  state  averaged 
8.01  percent. 

In  West  Virginia,  the  mineral  industry  paid  in  taxes  17.35 
percent  of  the  surplus.  The  coal  mines  paid  24.95  percent ;  the 
petroleum  and  natural  gas  wells,  12.15  percent;  the  limestone 


753] 


THE   TAX   BURDEN 


223 


TABLE  No.  25. 

TAXES   PAID   IN    1909   BY   SANDSTONE  QUARRIES,    BY   STATES. 


State 

Value 
of 
product 

Expenses 
not 
including 
taxes 

Surplus 
before 
taxes 
are 
paid 

Taxes 
paid 

Percent 
of 
surplus 
paid  in 
taxes 

Alabama 

$         65,687 
297,184 
78,160 

289,579 
189,780 
191,760 
30,004 
30,360 
19,559 
90,834 
16,070 
270,002 

$        63,129 
307,960 
46,867 
260,193 

i7i,549 
112,090 
Data  inc 
20,316 
io,945 
64,857 
16,022 
268,359 
Data  inc 
Data  inc 
25,290 

73,357 
142,221 

427,452 
689,603 
2,018,916 
40,141 

1,371,022 
476,534 
84,355 
50,948 
66,714 
Data  inc 
274,864 
187,532 
139,684 
16,216 

1         2,558 
-  10,776 
31,293 
29,386 
18,231 
79,670 
omplete 
10,044 
8,614 

25,977 
48 

i,643 
omplete 
omplete 
3,982 
1,236 
45,057 

81,186 
220,451 
379,390 
19,314 

178,486 
179,586 
4,673 
21,661 

4,771 
omplete 

3,657 
55,903 
60,552 

6,639 

*          307 

811 
306 
3,158 
928 
11,278 

I2.OO 

Arizona  

Arkansas  

.98 

10.74 

5-09- 
14.16 

California.  

Colorado   

Connecticut—  

Idaho  

Illinois 

89 
82 
657 
43 
2,563 

.89 

•95 
2-53 

Kansas  

Kentucky.-  

Maryland. 

Massachusetts  
Michigan  _  

Minnesota    . 

Missouri...  

29,272 

74,593 
187,272 

508,638 
910,054 
2,398,306 
59,455 

1,549,508 
656,120 
89,028 
72,609 
71,485 

226 
5H 
1,237 

2,146 

1,987 
6,764 

151 

11,130 

2,897 
94 
204 

30 

5-68 
41-59 
2-75 

2.64 
.90 

1.8? 

.78 

6.24 
1.61 

2.01 

•94 
•63 

Montana- 

New  Jersey 

New  York: 
Sandstone.  
Bluestone._  
Ohio  

Oklahoma 

Pennsylvania: 
Sandstone.  
Bluestone._  
South  Dakota  
Texas  

Utah  

Virginia 

Washington 

271,207 

243,435 
200,236 

22,855 

1,569 
1,256 
1,078 

245 

West  Virginia  
Wisconsin  

2.25 
1.78 
3-69 

Wyoming 

224 


MINE   TAXATION   IN   THE  UNITED   STATES 


[754 


TABLE  No.  26. 

TAXES   PAID   IN    1909   BY   SLATE   QUARRIES,    BY   STATES. 


Surplus 

Percent 

Value 

Expenses 

before 

of 

State 

of 

not 

taxes 

Taxes 

surplus 

product 

including 

are 

paid 

paid  in 

taxes 

paid 

taxes 

Maine  

$       223,809 

$       224,896 

$         1,087 

$       2,805 

Maryland 

I2Q.5^8 

lOQ.IQa 

2O.  ^4.5 

i.  -14.  T. 

6.60 

New  York 

00,827 

QQ.IOQ 

808 

4.O  5 

50.  1  2 

Pennsylvania—  

3,492,026 

3,386,985 

105,041 

20,119 

I9.I6 

Vermont  _. 

1,  864.,  59  1 

1,681,74.5 

182,846 

5,248 

2.87 

Virginia     

182,543 

232,030 

49,487 

2,276 

quarries  0.85  percent ;  and  the  sandstone  quarries,  2.25  percent. 

Statistics  collected  by  the  West  Virginia  Coal  Association 
show  that  the  coal  industry  of  West  Virginia  paid  in  taxes  for 
the  year  1915  the  sum  of  $2,242,311.51.  The  total  assessed  Value 
of  coal  properties  in  the  state  amounted  to  $186,843,411.  In 
addition  to  the  state  taxes  on  property  the  mining  corporations 
pay  a  corporation  tax  in  the  form  of  a  license  fee  and  also  an 
excise  tax. 

The  total  assessed  valuation  of  the  coal  industry  was  second 
only  to  the  taxes  paid  by  the  steam  railroads,  namely  $188,910,- 
745.    The  oil  and  gas  companies  were  assessed  $99,434,636.3 
In  Pennsylvania,  the  following  may  be  noted : 

Percentage  of  surplus 
paid  in  taxes 

All  mineral  industries,  in  1909 10.69 

Bituminous  coal  mines _ 10.83 

Anthracite  mines - 15.39 

Iron  mines  —          4.51 

Petroleum  and  natural  gas  wells —          2.94 

Granite  quarries  3.86 

Limestone  quarries 2.52 

Sandstone  quarries 6.24 

Slate  quarries 19.16 

3Black  Diamond,  1916,  LVII,  347. 


755] 


THE   TAX   BURDEN 


225 


TAXES  PAID  BY  INDIVIDUAL  MINING  COMPANIES 

In  many  of  the  published  reports  of  mines  the  amount  of 
the  taxes  paid  is  combined  with  other  expenses  so  that  it  has 
been  impractical  to  secure  data  for  these  mines.  In  Tables  No. 


TABLE  No.  27. 

TAXES   PAID   BY  COPPER   MINING  COMPANIES. 


Company 

Date 

Net 
value  of 
product 
in  M 
dollars 

Taxes  paid 

Total 

Per 

ton  ore 
mined 

Per 
pound 
copper 

Per 
cent 
net 

Copper  Queen  « 
Copper  Queen* 
Copper  Queen* 
Ray  Consol'd* 
Ray  Consol'd  « 
Miami* 

1900 
1912 

1913 
1912 

1913 
1913 
1904 
1908 
1912 
1908 
1912 
1908 
1912 
1912 

1912 
1912 
1903-13 

1912 

1913 
1908 

$      13,158 

248,109 
349,774 
40,713 

6,9  1  7M 

«  i,8i4M 
•  2.497M 
i 
65M 
I,OO4M 
758M 
959M 
i,3i3M 
giM 
349M 
r.iosM 

4,6i4M 
II.447M 
83.Q53M 

»o       47M 
3,i9oM 

"   2,402  M 

*   .532 
.026 
.00  •* 

IO.O 

I<>.  K. 
3-82 
8.08 

5-75 
4-74 
41.50 
11.65 

Atlantic* 

6,592 
38,313 
61,276 

55,179 
62,199 

37,903 
40,681 

.017 
.050 

•0939 
.0694 
.081 
.on 
.no 
.048 

.0012 
.00216 
.005 
.0031 
.0039 
.0063 
.0059 
.003 

.006 

.002 

Baltic*          

Baltic*  

Champion*  
Champion*  
Trimountain*  .... 
Trimountain*   .... 
Quincy*  
Calumet  and 
P  Hecla«  .  
Anaconda7  ._  
Amalgamated7 
Nevada 
j|  Douglas7  
Chino7 

9.0 

5-5 
2.41 

3-12 
1.36 

625,900 
2,001,504 

1,462 
43,409 
7,588 

•137 

•0516 
.0223 

.00086 

.00012 

Utah  Copper'  

4General  property  tax. 

5Bullion  tax. 

6Gross  and  net  earnings  tax. 

7Net  proceeds  tax. 

"Skinner,  E.  N.  and  Plate,  H.  R.    Mining  Costs  of  the  World,  p.  29. 

9Reported  by  Mr.  J.  P.  Channing. 

10For  4  months  only. 

"Assessed  at  $1,000,000. 


226 


MINE  TAXATION  IN  THE  UNITED   STATES 


[756 


TABLE  No.  28. 

TAXES   PAID   BY   IRON   MINES. 


Locality 

Date 

Taxes  paid 

Total 
paid 

Per 
ton 
,  shipped 

Per 

ton 
mined 

Per 

cent 
net 

Michigan:17 
Gogebic  Range  

1902-06 
1902-06 
1902-06 
1912 

1913 
1909-13 
1912 

1913 
1909-13 
1912 

1913 
1909-13 
1912 

1913 
1909-13 
1912 
1913 
1909-13 

1902-06 
1902-06 
1906 
1907 
1908 

1913 
1914 

1913 
1914 
1906-14 

1914 

$    179,272 
671,489 
604,264 
1,291,081 
1,314,538 
6,258,291 

1  7,820  »• 

.06 
.04 

•05 
.10372 

•13999 

.06676 
.09907 

•15652 
.15432 

.12970 
.13066 

.10807 
.12709 

.07 
.04 
.00707" 
.0231' 
.0321= 
.036  >» 
.0591' 
•1758" 
.231* 

.02  841  »3 

*• 

•13539 
.12523 
.11801 
.07617 
.09675 
.06403 
.17200 
.16072 
•13555 
.14250 
•12095 
.11417 
.12644 
.12144 
.10647 

8.56 
9.14. 

I7-83 
12.51 
10.95 

5-205 

Marquette  Range  

Menominee  Range 

Gogebic  Range 

Gogebic  Range 

Gogebic  Range  .  .  ...•  

Iron  County  

Iron  County  

Iron  County 

Menominee  Range  .. 

Menominee  Range  

Menominee  Range  

Marquette  Range 

Marquette  Range 

Marquette  Range 

State             

State  

State  

Minnesota:17 
Mesabi  Range.-     

Vermillion  Range  

State  

State 

State    

State._  

State  

State 

State._  

State-  

Wisconsin.  .         

"State  taxes  only. 
13State  and  local  taxes. 
14State  and  local  taxes,  estimated. 
"Average  of  state  taxes. 
16State  income  tax  only. 
"General  property  tax. 


757] 


THE   TAX   BURDEN 


227 


27  to  30  inclusive  are  grouped  the  taxes  paid  in  recent  years 
by  copper,  iron,  coal,  and  gold  and  silver  mining  companies. 
Additional  historical  data,  of  interest  for  comparative  purposes, 
are  included  in  the  text.  In  addition  to  the  statistics  of  taxes 
paid,  data  showing  the  assessed  valuation  of  mining  property 
are  included  in  order  to  show  present  tendencies  in  valuing 
mines  and  mineral  lands. 


TABLE  No.  29. 

TAXES   PAID   BY  COAL   MINING  COMPANIES. 


Net 

1 

Taxes  paic 

1 

Company 

Date 

value  in 

Per 

M  dollars 

Total 

Per  ton 

cent 

net 

Pennsylvania:" 

Philadelphia  and  Read- 

ing Coal  and  Iron  ~ 

1908 

$.033 

Delaware  &  Hudson.-  

1912 

.045 

Lehigh  Coal  &  Navig'n.... 

1904 

i,  466"  » 

$  224,700 

.1098" 

15-28 

Lehigh  Coal  &  Navig'n.... 

1909 

i,887«» 

292,400 

.0922  n 

1549 

Lehigh  Coal  &  Navig'n.... 

1913 

2,372  >• 

540,700 

.125" 

22.80 

Virginia11  

1905-06 

.Oil" 

18Net  credited  to  profit  and  loss. 
"Based  on  all  taxes  paid  by  company. 
20Ffrlay,  Cost  of  Mining,  p.  73. 
21General  property  tax. 


228  MINE  TAXATION  IN  THE  UNITED  STATES 

TABLE  No.  30. 

TAXES   PAID   BY   GOLD   AND   SILVER   MINING  COMPANIES. 


[758 


Company 

Date 

Taxes  paid 

Total 
taxes 

Per 
ton 

Percent 
gross 

Percent 
net 

California:" 
Gold  dredging  company 
Brunswick             

1910 
1913 
1913 

1906 
1908 
1911 
1911 

1913 
1912 
1911 

1909 
1911 

1913 
1913 
1913 
1911-12 

1913 
1913 
1914 
1912 

1913 
1914 

1913 
1914 

1915 

1911 
1912 
1913 

899-85 
28,293 

12,851 

9.329-32 

52,839 
36,993 

41,370" 
10,014" 

25,025  »o 

7,392.21 

2,507-73 
6,772.13 
40,954.68 
10,487.06 

39,206.79 
29,685.08 

40,811.07 

74,868.42 

59,010.89 
112,490.65 
115,390.93 

.0018" 

-059 
.267 

.0892 
.10 
.09 
.16 
•15 

•485 

-153 

-0845 

.12 

-03 
.07 

•137 
.062 
-065 
.I45'i 

-354 
.081 
.227 
.171 

•249 
.522 

.0402 
.0736 
.0749 

1.58 
-435 
2.36 

1.17 
1.31 

1.  00 

2.38 
1.87 
.66 
1.44 

1.68 

1.  12 
I.  O6 

•495 
-95 
•50 
-49 
1-55 
1-25 
•36 
I.I6 
1.05 
i-57 
3-47 

1.124 
1.704 
1.865 

4.04 
1.04 
5-12 

2.49 
6.58 

2.O2" 
6.83 
4.13" 
2.27 
3.80 

4.82 

3-33 

1.92 

.90 
2.66 
1.47 
3.80 
3.80 
2.28 
1.38 
i-95 
1.87 
2.96 
7-95 

4.129" 
4.142" 
5-495" 

North  Star  _    

Colorado:  24 
Iron  Silver 

Liberty  Bell 

Liberty  Bell   

Tom  Boy     

Tom  Boy 

El  Paso 

Vindicator 

Idaho:" 
Bunker  Hill  &  Sullivan.. 
Bunker  Hill  &  Sullivan.. 

Nevada:25 
Goldfield  Consolidated  .. 
Goldfield  Consolidated  .. 
Goldfield  Consolidated  .. 
Montana  Tonopah 

Nevada  Hills  

Nevada  Wonder  

Nevada  Wonder 

Tonopah  Belmont  
Tonopah  Belmont—  

Tonopah  Belmont  
Tonopah  Mining   _ 

Tonopah  Mining.  

Tonopah  Mining—  

South  Dakota:" 
Homestake  

Homestake.  

Homestake...  _  

22-32  Footnotes  on  page  229. 


759] 


THE   TAX    BURDEN 


229 


According  to  Mr.  J.  Ross  Browne33  the  Eureka  Gold  Min- 
ing Company,  operating  a  gold  placer  in  California,  produced 
$147,529.50  between  June  5,  1863  and  August  11,  1864.  Of  this 
sum  there  was  credited  to  dividends  $66,000  and  there  remained 
a  balance  above  taxes  of  $4,078.45.  The  taxes  paid  amounted  to 
$108.40. 

It  has  frequently  been  urged  that  many  precious  metal 
mines  have  not  paid  to  the  state  a  proper  share  of  the  profits. 
The  following  data  are  interesting  as  they  show  the  amount  of 
taxes  paid  and  the  ratio  between  the  taxes  and  earnings  during 
the  ' '  bonanza ' '  period  in  several  of  the  western  mining  states. 

Data  on  two  Nevada  mines  as  reported  by  Mr.  Browne34 
and  by  Mr.  James  D.  Hague,35  are  given  in  Table  No.  31. 

TABLE  No.  31. 

DATA  SHOWING  TAXES  PAID  BY  NEVADA  MINING  COMPANIES  IN   1867  TO   1869. 


1867 

1868 

1869 

Savage  Mining  Company: 
Tons  produced 

70,721 

87.  ^4.2 

51.Q54. 

Total  costs  per  ton  including  taxes  
Profit  per  ton  

21-95 
IQ.QO 

20-95 
I9.8Q 

21.22 

It.  75 

Total  taxes 

$20.0^7.52 

4Of^42.6l 

IQ.4.86.7^ 

Taxes  per  ton 

O.2Q 

O.4.6 

O.^6 

Percentage  of  profit  to  taxes 

1.4.6 

2.2Q 

2.67 

Hale  and  Norcross  S.  Mining  Co.  : 
Tons  produced 

2Q.4O4 

2S,4"*2 

Total  yield 

$1,^5.220.4.0 

Total  cost  

266,679.18 

Net,  above  operating  expenses 

1,088,541.22 

Total  taxes       .                   

II,II3.9O 

I2.4O4.O4 

Taxes  per  ton  

.38 

•49 

Percentage  of  net  to  taxes 

I.  O2  1 

"General  property  tax. 

23Bullion  tax.  25Net  proceeds  tax. 

24Gross  and  net  earnings  tax.  28Per  cubic  yard. 

27Net  value  per  ton  increased  from  $1.52  in  1908  to  $4.45  in  1911. 

28Net  value  per  ton  increased  from  $2.67  in  1911  to  $3.70  in  1913. 

29Property  tax.  30Federal  income  tax. 

"Increases  due  to  change  in  assessing.        82Based  on  dividends  paid. 

^Mineral  Resources  of  the  United  States.    1867-68.    p.  189. 

3*Mineral  Resources  of  the  Pacific  Slope,    p.  375. 

S5Mining  Industry.    Exploration  of  the  40th  Parallel,    p.  154. 


230  MINE  TAXATION  IN  THE  UNITED  STATES  [760 

The  Consolidated  Virginia  mines  in  the  year  1875  produced 
bullion  worth  $16,957,538.99.  Dividends  amounting  to  $12,204,- 
000  and  taxes  amounting  to  $152,795.13  were  paid.36  The  taxes 
amounted  to  1.252  percent  of  the  dividends. 

Table  No.  27  shows  the  taxes  paid  per  ton  of  ore  mined  and 
per  pound  of  copper,  and,  when  the  data  are  available,  the 
percent  of  the  net  earnings  paid  in  taxes. 

Data  are  given  in  Table  No.  28  for  the  average  of  the  iron 
ranges  of  Minnesota  and  Michigan.  Comparison  may  be  made 
of  the  taxes  per  ton  of  ore  mined  and  shipped  and  the  percent 
of  the  net  earnings  paid  for  taxes. 

But  few  data  are  available  on  coal  mines,  and  these  are 
chiefly  on  anthracite  mines.  The  available  data  are  given  in 
Table  No.  29  and  are  expressed  principally  as  taxes  per  ton  and 
as  percentages  of  the  net  earnings  paid  for  taxes. 

Data  on  gold  and  silver  mining  companies  are  given  in 
Table  No.  30.  Most  of  the  data  are  for  the  years  since  1910 
and  therefore  offer  little  basis  for  comparison  with  the  census 
data  in  Tables  No.  16  and  17.  It  has  not  been  possible  to  de- 
termine the  net  value  upon  the  same  basis  for  all  mines,  but  in 
general  the  figures  given  are  accurate  enough  for  comparison 
between  the  different  systems  of  taxation. 

Taken  as  a  whole  the  data  in  Table  No.  30  show  that  the 
precious  metal  mines,  in  the  five  states  for  which  data  are  given, 
pay  as  taxes  a  smaller  percentage  of  the  net  earnings  or  surplus 
above  operating  expenses  than  most  mines  of  the  same  type 
operating  under  other  systems  of  taxation.  None  of  the  Nevada 
mines  for  which  data  are  given  was  paying  more  than  3.80  per- 
cent in  taxes  until  1914.  In  all  of  the  other  states  listed,  most 
mines  are  paying  more  than  this.  The  foregoing  statement  does 
not  imply  that  the  mines  in  each  state  were  not  paying  their 
share  of  the  taxes  as  compared  with  other  classes  of  property  in 
the  same  district. 

Some  of  the  typical  gold  mines  may  be  compared.  The 
North  Star  in  California  paid  5.12  percent  in  taxes  in  1913, 
while  the  Homestake  in  South  Dakota,  also  taxed  under  the  gen- 
eral property  tax,  paid  5.495  percent.  Operating  under  a  net 
proceeds  tax  were  the  Tonopah  Mining  Company  of  Nevada 

36Raymond,  R.  W.  Statistics  of  mines  and  mining  in  the  states  and 
territories  west  of  the  Rocky  Mountains.  8th  Annual  Report,  Commis- 
sioner of  Mineral  Statistic*.  Washington,  1877.  p.  155. 


761]  THE  TAX  BURDEN  231 

which  paid  2.96  per  ton  in  1914,"  and  the  Bunker  Hill  and 
Sullivan  of  Idaho  which  paid  3.33  percent  in  1911. 

Arizona.  In  1911  the  valuation  of  mining  property  as 
equalized  by  the  Territorial  Board  of  Equalization  was  as  fol- 
lows: 

Productive  patented  mines,  526 $  10,568,560.80 

Improvements  on  productive  patented  mines 685,254.00 

Non-productive  patented  mines,  81,031  acres 2,898,465.38 

Improvements  on  non-productive  patented  mines™      1,919,748.00 

Patented  mill-sites,  714.97  acres 28,667.58 

Improvements  on  productive  unpatented  mines 

and  claims 74,400.00 

Improvements    on    non-productive    mines    and 

claims 526,666.50 

Smelters,  not  included  in  improvements  on  mines 

and  claims  2,540,569.00 

All  mining  property,  93  percent  of  the  total _     19,242,331.36 

All  property  subject  to  taxation _    98,032,708.64 

All  mining  property,  1912,  31.7  percent  of  total......    42,145,084.49 

All  mining  property,  1913,  37.2  percent  of  total 140,488,649.30 

All  mining  property,  1914,  35.7  percent  of  total......  134,247,752.59 

All  productive  mines,  191637a..._ 212,301,620.55 

Colorado.     The  assessed  valuation  returned  by  the  county 

assessors  of  Colorado  in  1913  and  1914  was  as  follows : 

1913  1914 

Non-productive    metalliferous    mining 

claims -.-. -..$13,796,749      $14,433,012 

Improvements  on  metalliferous  mining 

claims 8,929,872          9,048.223 

Assessment  on  output  from  metallifer- 
ous mining  claims -  18,728,434        13,309,939 

Total  as  returned  by  assessors 41,455,055        36,791,174 

Total  as  corrected  by  the  tax  commis- 
sion   46,042,067        41,468,531 

The  increase  from  $18,012,830  in  1912  to  $46,042,067  in  1913 

37The  report  of  the  Tonopah  Mining  Company  for  the  year  ended 
February  28,  1915,  shows  that  the  taxes  paid  durfog  the  previous  fiscal 
year  amounted  to  7.95  percent  of  the  net  earnings. 

87aZander,  C.  M.,  Assessment  of  mining  property  in  Arizona.  Bulletin 
of  National  Tax  Association,  1916,  II,  20. 


232 


MINE  TAXATION   IN   THE  UNITED   STATES 


[762 


was  due  to  the  change  in  the  law.38  The  metal  mines  in  1912 
were  assessed  at  4.27  percent  of  the  total  for  the  state ;  in  1913, 
3.52  percent ;  in  1914,  3.17  percent ;  and  in  1915,  2.64  percent. 

In  the  fifteen  principal  metal  mining  counties  of  Colorado 
the  mines  have  paid  a  large  proportion  of  the  taxes,  as  shown 
by  the  following  statistics  of  assessed  valuation: 
Assessed  value  of  all  min-     1912  1913  1914 

ing  property  $17,896,173     $43,546,803     $38,667,874 

Assessed  value  of  all  other 

property 36,974,647     109,446,426     107,134,265- 

Coal  land  and  improvements  were  returned  by  the  county 
assessors  of  Colorado  as  shown  in  Table  No.  32. 

TABLE  No.  32. 

ASSESSED  VALUE   OF  COAL   LANDS   AND   IMPROVEMENTS   IN  COLORADO. 


Assesse 

1  value 

Acres 

Total 

Per  acre 

1913 

Productive  coal  land 

58,812 

$7.2^0,^80 

$    123.10 

Non-productive  coal  land      .  ... 

2O5.4I"* 

8,806,892 

42.68 

Improv'm'ts  on  productive  land 

4,74.1,020 

Improv'm'ts  on  non-productive 
land  . 

88,260 

Coal  reserves  

31,791 

335,020 

24.30 

1914 
Productive  coal  land  

57,648 

$7,103,355 

$    123.22 

Non-productive  coal  land 

2IO,OI5 

9,131,503 

43.48 

Improv'm'ts,  productive  land 

5.2QQ.7QO 

Improv'm'ts,  non-productive 
land 

346,060 

Coal  reserves 

12,242 

283,460 

23.15 

Nevada.    Statistics  of  taxes  paid  by  Nevada  mines  in  1911, 
1912,  and  1913  are  given  in  the  accompanying  table : 


191139  1912 

Bullion  tax  collected  $     259,625.90     $165,508.78 

Tonnage  „.._    4,242,006.00 

Value  „.„ 32,515,030.39 

38Supra,  Chapters  III  and  IV. 

^Annual  Report  Bullion  Tax  Agent,  1912,  p.  50. 

*°Report  for  1913-14,  Nevada  Tax  Commission,  p.  21, 


191340 
&     182,076.37 
5,286,338.00^ 
32,701,522.47: 


763]  THE   TAX   BURDEN  233 

Utah.  According  to  the  Report  of  the  Utah  State  Board  of 
Equalization41  for  1913-14  the  assessed  value  of  the  raining  prop- 
erty for  the  state  was  as  follows: 

1913  1914 

Mining  companies $    3,721,407        $    3,990,283 

Net  proceeds  .„ 11,393,366  9,649,932 

Mining  claims _ _ 1,131,952 

Total  of  all  property 213,868,897          221,720,400 

Virginia.    The  assessed  value  for  1913  of  mineral  lands  in 

Virginia42  is  shown  by  the  following  data : 

Lands  under  development  Per  acre  Total 

Value  of  land $  5.06  $     640,323 

Value  of  minerals 21.42  2,715,422 

Value  of  improvements  and  machinery  49.80  6,323,651 


Total  ...„ _ $76.28  $  9,676,376 

Lands  not  under  development 

Value  of  land 2.84  6,409,530 

Value  of  minerals 4.56  10,277,093 

Value  of  improvements  and  machinery       .49  1,113,220 


Total $  7.89  $17,799,843 

Total  value  of  land $  7,049,853 

Total  value  of  minerals 12,992,515 

Total  value  of  improvements  and  machinery 7,433,871 


Total $27,476,239 

Wyoming.  The  state  and  county  taxes  on  the  output  of  the 
mines  of  Wyoming  amounted  to  $62,878.48  in  1908  and  to  $30,- 
094.51  in  1910.  The  mines  in  Sweetwater  and  Unita  counties 
paid  over  $40,000  in  1908,  the  rate  being  approximately  $19  per 
$1000 ;  in  1910  the  mines  in  these  counties  paid  $27,000,  the  rate 
having  been  reduced  to  less  than  $8  in  both  counties.  In  1913, 
the  output  tax  of  the  mines  of  the  state  amounted  to  $47,734.95. 
The  mines  of  Sweetwater  county  were  taxed  at  a  rate  of  $8.88 
and  paid  $22,164.14  of  the  total  of  $47,734.95. 

*lReport  for  1913-14,  Utah  State  Board  of  Equalisation,  pp.  26,  54.  57- 
4zReport  of  Joint  Committee  on  Tax  Revision,  Virginia,  1914,  PP-  3'-33- 


CHAPTER   IX 
SUGGESTED  METHODS  OP  TAXATION  AND  REFORMS 

The  prevailing  methods  of  taxing  mines  have  provoked 
much  discussion  and  have  frequently  been  criticised  as  being 
unjust  and  inefficient.  From  time  to  time  there  have  been  made 
many  suggestions  for  the  correction  of  apparent  or  imagined 
faults  in  the  system.  At  the  present  time  there  seems  to  be 
generally  a  sincere  desire,  on  the  part  of  the  mine  owners  and 
the  tax  officials  alike,  to  discover  the  facts  and  to  equalize  the 
tax  burden.  In  a  number  of  the  western  states  the  mine  oper- 
ators have  realized  that  within  the  local  taxing  district  at  least 
there  is  little  to  be  gained  by  attempts  at  concealment  of  the 
physical  condition  of  the  mine  and  of  the  financial  condition  of 
the  mining  company.  The  value  of  the  real  estate  in  the  mining 
districts  usually  varies  directly  with  the  aggregate  value  of  the 
mines,  and  as  the  mines  become  exhausted  the  value  of  the 
real  estate  diminishes  unless  there  are  other  local  industries  that 
can  support  the  population  previously  engaged  in  mining. 

This  interdependence  of  interests  has  been  demonstrated 
recently  in  several  mining  districts  in  which  the  important 
mines  have  depreciated  in  value.  When  the  mining  companies 
asked  the  Boards  of  Equalization  for  a  reduction  in  the  assessed 
value  of  the  mines,  the  other  property  owners  demonstrated  the 
fact  that  the  depreciation  suffered  by  the  mining  companies  was 
no  greater  than  that  suffered  simultaneously  by  owners  of  dwell- 
ings and  business  houses  in  the  mining  community  and  that  a 
reduction  of  the  assessed  value  of  the  mines  would  result  in 
greatly  increased  taxes  upon  other  property.  It  was  shown  in 
a  number  of  instances  that  the  mining  companies  were  no  less 
able  to  pay  taxes  than  were  the  other  property  owners. 

The  criticisms  of  the  methods  of  taxing  and  appraising 
mines  have  come  principally  from  four  classes  of  writers, 
namely,  (1)  mining  engineers,  (2)  mine  operators  and  officers, 
(3)  state  officers  and  tax  commissions,  and  (4)  economists. 

The  criticisms  of  mining  engineers  have  usually  been  di- 
rected at  the  methods  of  appraising  mines  for  taxation  rather 

234 


765]  SUGGESTED  REFORMS  235 

than  at  the  system  of  taxation  employed.  The  mining  capitalist 
has  frequently  made  a  protest  against  increased  assessment 
and  changes  in  rates  or  in  the  system  of  taxation.  In  a  number 
of  instances  protests  have  been  filed  against  heavy  public  expen- 
ditures within  the  local  taxing  district.  The  mine  operator  and 
the  mine  capitalist  are  probably  no  less  public  spirited  than 
those  who  furnish  the  capital  for  other  industries;  in  fact,  in 
many  of  the  western  and  of  the  Lake  Superior  mining  districts, 
the  mining  companies  pay  most  of  the  taxes  and  realize  that 
they  must  continue  to  do  so.1 

The  view  point  of  the  state  officer  is  occasionally  influenced 
by  the  demand  made  upon  him  for  additional  funds  to  meet  the 
increased  expenditure  of  the  state.  This  criticism  is  not  justi- 
fied in  general  as,  in  most  of  the  mining  states,  the  members  of 
the  tax  commissions  and  the  other  state  officers  have  been  broad- 
minded  and  fair  in  dealing  with  the  mining  industry,  particu- 
larly when  all  property  has  been  assessed  at  its  true  and  full 
cash  value.  The  mining  companies  have  come  to  realize  that 
they  are  more  apt  to  secure  justice  by  presenting  all  the  facts 
in  regard  to  the  condition  of  their  property,  than  if  attempts 
are  made  to  conceal  part  of  the  facts. 

The  criticisms  of  a  number  of  the  economists  who  have 
written  upon  the  taxation  of  mines  have  been  founded  upon  and 
formulated  from  their  personal  conceptions  of  public  rights  in 
minerals  and  have  not  been  directed  at  the  method  of  taxation 
itself. 

In  presenting  the  suggestions  and  criticisms  of  the  various 
contributors,  an  effort  has  been  made  to  point  out  suggestions 
that  (1)  can  be  formulated  into  laws  not  conflicting  with  exist- 
ing state  constitutions;  (2)  that  may  be  feasible  in  most  of  the 
mining  states;  (3)  that  may  be  practical  and  economical  of 
administration ;  (4)  that  will  apply  to  all  types  of  mines  without 
discrimination;  and  (5)  that  will  cause  mines  to  contribute  a 
fair  portion  of  the  necessary  public  revenue. 

MINING  ENGINEERS   AND   MINE  OPERATORS 

As  previously  noted,  most  of  the  criticisms  and  suggestions 
made  by  mining  engineers  and  geologists  have  been  directed  at 
the  methods  of  appraisal  rather  than  at  the  system  or  method 

*In  Ishpeming,  Michigan,  the  1912  tax  roll  was  $279,393  of  which 
three  mining  companies  paid  85  percent.  The  same  condition  prevails  in 
Minnesota  on  the  Mesabi  iron  range,  and  in  some  districts  the  mines 
pay  more  than  90  percent  of  the  taxes. 


236  MINE  TAXATION  IN   THE  UNITED   STATES  [766 

of  taxation.  In  this  discussion  attention  will  be  directed  par- 
ticularly to  the  system  or  method  of  taxation,  the  purpose  of 
this  discussion  being  to  show  what  the  mining  men  themselves 
think  of  the  systems  of  taxation  and  what  changes  they  would 
advise. 

Mr.  James  R.  Finlay  recommends  that  mining  property  be 
taxed  for  local  purposes  upon  the  value  of  the  surface  and  of 
the  equipment,  and  for  state  purposes  upon  the  excess  of  receipts 
over  expenditures.  The  combined  taxes  should  not  exceed  the 
average  levied  on  other  forms  of  property.  Undeveloped  min- 
eral lands  should  be  valued  exactly  as  unused  real  estate  is  val- 
ued, namely,  at  a  fixed  price  per  acre,  "according  to  the  prices 
fixed  by  mere  trading.  There  is  apparently  no  other  basis."2 

Mr.  J.  Parke  Channing  said:  "There  are  radically  differ- 
ent classes  of  mines ;  those  in  which  you  see  all  the  ore  and  those 
in  which  you  cannot  see  any.  We  must  know  it  is  impossible 
to  get  any  method  of  taxation  that  is  absolutely  equitable.  You 
have  to  get  a  method  that  is  a  compromise  and  get  as  nearly 
as  possible  to  the  truth.  And,  therefore,  I  am  strongly  of  the 
opinion  that  a  tax  or  valuation  based  upon  the  net  or  gross 
product  or  both  is  the  most  equitable."8 

Mr.  A.  H.  Rogers  favors  a  "reconciliation  of  property  and 
gross  product  taxes."4 

Mr.  Heath  Steele  has  presented  a  program  for  the  taxation 
of  mines  based  upon  apportioning,  to  each  industry  in  a  state 
its  share  of  the  revenue  to  be  raised  by  taxes.  This  burden 
should  then  be  apportioned  among  the  mines  as  follows: 

1.  A  tax  upon  all  surface  lands  owned,  according  to  their  use 
and  value. 

2.  After  the  surface  tax  has   been   adjusted,   a  rate  should  be 
determined  which,  when  applied  to  the  yearly  profits,  would  make 
up  the  balance  necessary. 

3.  All  buildings  not  used  immediately  in  mining  operations  should 
be  taxed  at  the  same  rate  as  other  property. 

4.  All  plants,  equipment,  unmined  ore,  and  untreated  ore  on  hand 
should  be  exempt  from  taxation. 

In  determining  profits,  Mr.  Steele  would  permit  deductions 
from  receipts  and  the  value  of  the  finished  product  on  hand 
as  follows: 

'Bulletin  of  Mining  and  Metallurgical  Society  of  America,  1912,  V,  i58. 

'Proceedings  of  National  Tax  Association,  1913,  VII,  407. 

^Bulletin  of  Mining  and  Metallurgical  Society  of  America,  1912,  V,  164, 


767]  SUGGESTED  REFORMS  237 

Actual  expenditures  for  mining,  transporting,  and  treating 
the  ore;  refining  and  selling  the  product;  and  depreciation 
based  on  the  original  cost  of  the  plant  and  equipment.  He 
would  not  allow  for  the  purchase  price  of  the  mine  "owing  to 
the  many  ways  in  which  this  account  could  be  figured. '  '5 

Mr.  H.  M.  Chance  concluded  a  discussion  of  the  general 
subject  of  mine  taxation  with  the  following  statement :  ' '  Taxa- 
tion for  revenue  only,  without  the  incidental  purpose  of  restraint 
or  regulation,  would  certainly  seem  to  be  the  only  form  of  taxa- 
tion that  is  just  and  equitable  to  interests  affected."8  He  con- 
siders impractical  the  proposal  to  extend  the  Finlay  system  of 
appraisal  to  most  of  the  metal  mining  districts  owing  to  the  cost 
of  making  the  appraisal  and  owing  to  the  nature  of  the  ore 
deposits,  but  apparently  favors  a  physical  valuation  or  capitali- 
zation of  earnings  as  the  most  practical  method  of  appraising 
coal  mines  and  lands. 

The  Coal  Tax  Commission  appointed  in  1907  to  appraise  the 
anthracite  properties  in  Northumberland  County,  Pennsylvania 
stated:  "Coal  land  in  the  process  of  mining  becomes  depleted 
from  year  to  year,  and  finally  exhausted  and  valueless  as  coal 
land.  Its  body  has  been  destroyed  and  can  never  be  restored; 
and,  in  order  to  earn  any  income  from  it,  it  is  necessary  to 
destroy  it.  Therefore  it  is  evident  that  each  and  every  ton  of 
coal  in  the  ground  should  share  equally  in  the  burden  of  taxa- 
tion. This  could  best  be  accomplished  by  a  uniform  tax  upon 
each  ton  as  mined.  There  seems  no  equitable  reason  why  the 
unremunerative  ton  of  coal  which  is  to  lie  dormant  in  the  ground 
for  fifty  or  one  hundred  years  should  pay  taxes  annually  during 
that  time  while  the  remunerative  ton  which  is  mined  and  sent 
to  market  today  escapes  with  only  the  one  year's  tax.  We  are 
therefore  forced  to  the  opinion  that  the  only  remedy  for  the 
existing  difficulties  surrounding  the  taxing  of  coal  lands  rests 
with  our  lawmakers,  and  they  should  act  quickly,  before  the 
coal  is  all  sent  to  market,  thus  escaping  its  equitable  share  of 
the  cost  of  government.  A  tax  upon  the  output  annually  seems 
the  only  remedy.  The  unremunerative  coal  contained  in  idle 
properties  might  be  taxed  at  a  nominal  rate  per  acre  for  the  coal, 

8Steele,  Heath.  Mine  taxation.  Engineering  and  Mining  Journal, 
1914,  XCVIII,  381. 

6Chance,  H.  M.  Taxation  of  mining  property.  Proceedings  of  Ameri- 
can Mining  Congress,  1913,  XVI,  339. 


238  MINE  TAXATION  IN  THE  UNITED  STATES  [768 

similar  to  the  present  method  of  taxing  unremunerative  or  un- 
seated surface  land."7 

Mr.  William  Griffith,  an  eminent  mining  engineer  of  the 
Pennsylvania  anthracite  fields,  recently  made  a  statement  in 
regard  to  the  existing  conditions  of  appraisal  and  taxation  in 
the  antharcite  districts.8  He  concluded:  "Anthracite  should 
be  taxed  once  and  once  only.  Perhaps  the  better  way  to  accom- 
plish this  would  be  to  eliminate  the  taxation  of  coal  as  real 
estate,  except  in  a  nominal  way,  and  lay  a  tax  upon  each  ton 
of  coal  as  it  is  mined,  as  is  being  advocated  by  the  Scranton 
Board  of  Trade." 

^Report  of  Coal  Tax  Commission  of  Northumberland  County,  Pa., 

1907,  P.  35- 

^American  Mining  Congress  Journal,  1916,  II,  382.  Mr.  Griffith  re- 
ports that  the  Commissioners  of  Lackawanna  County  have  variously  esti- 
mated the  value  of  coal  at  from  $300  to  $500  per  foot  acre,  and  recently 
in  Luzerne  County  one  group  of  engineers  employed  by  the  landowners 
estimated  the  value  of  a  certain  tract  of  land  at  or  around  $700  per  sur- 
face acre,  while  another  group  employed  by  the  county  authorities  esti- 
mated the  same  land  at  about  four  times  this  value.  Mr.  Griffith  has 
used  the  royalty  rate  as  a  proper  standard  of  valuation.  "The  supreme 
courts  have  declared  that  a  perpetual  lease  is  a  sale  and  that  the  royalties 
are  installments  on  the  purchase  price.  Therefore,  the  royalty  represents 
the  value  of  the  coal  in  the  ground,  and  is  a  fair  and  equitable  standard 
of  value  for  estimating  the  worth  of  the  coal ;  better  to  our  mind  than 
outright  sales,  because  the  sales  of  coal  land  in  this  locality  are  not 
frequent,  and  the  deeds  and  records  of  such  transactions  usually  cover 
up  the  actual  selling  price  so  that  it  cannot  be  ascertained.  Of  course, 
each  property  becomes  a  problem  in  itself,  but  having  a  basic  standard,, 
deductions  or  allowances  may  be  made  to  conform  to  the  various  condi- 
tions and  possibilities  that  may  be  peculiar  to  each  property. 

It  will  be  noted  that  this  method  of  ascertaining  the  taxable  value 
of  coal  places  the  greater  burden  of  the  tax  upon  the  coal  in  the  going 
properties,  which  will  be  somewhat  exhausted.  For  example,  at  the  roy- 
alty rate  of  30  cents  per  ton,  other  things  being  equal,  the  coal  in  a  prop- 
erty which  will  be  exhausted  in  ten  years,  would  have  a  present  value  of 
22  cents  per  ton,  whereas  at  the  same  royalty  rate  the  coal  in  an  adjoin- 
ing property  which  had  a  life  of  sixty  years  would  have  a  present  value 
of  8.1  cents  per  ton.  To  our  mind,  this  is  as  it  should  be,  because  it  is 
manifestly  unfair  to  tax  the  unremunerative  ton  year  after  year  at  full 
rate  for  60  or  100  years,  whereas  the  remunerative  ton  of  coal  which  is 
mined  this  year  escapes  with  but  one  tax.  And,  along  the  same  line, 
virgin  properties  which  are  held  for  future  mining,  should,  to  our  mind, 
be  considered  in  the  same  manner  as  we  now  treat  unremunerative,  un- 
seated lands,  by  imposing  a  sufficient  nominal  tax  until  such  time  as  they 
become  productive." 


769]  SUGGESTED  REFORMS  239 

Mr.  R.  V.  Norris  has  considered  particularly  the  taxation 
of  anthracite  mines  and  lands  in  Pennsylvania.  He  objects  to 
the  methods  of  taxation  and  of  appraisal  at  present  in  use  on 
the  ground  that  they  lead  to  the  "rapid  and  uneconomical  ex- 
haustion of  the  mineral  wealth  of  the  country,  and  put  a  pre- 
mium on  premature  and  wasteful  exploration."  He  proposes 
the  following  program:  "The  proper  method  of  taxation  for 
all  minerals  appears  to  be  a  tax  based  on  the  value  at  the  mine 
of  each  year's  product  at  the  local  rate  of  taxation  assessed 
for  that  particular  year,  including  an  assessment  on  surface 
lands,  outside  improvements  and  machinery,  the  value  of  which 
is  readily  ascertainable ;  but  not  including  any  valuation  of 
mine  openings,  or  inside  improvements,  which  are  incidental  to 
the  mining  process  and  which  after  the  exhaustion  of  the  mineral 
are  of  no  value."9 

The  proposals  of  Mr.  E.  B.  Kirby  and  of  Mr.  R.  B.  Brins- 
made  are  presented  under  the  discussion  of  the  single  tax.10 

Mr.  E.  C.  Allen,  State  Geologist  of  Michigan,  who  is  offi- 
cially Mine  Appraiser  for  the  Michigan  Board  of  State  Tax, 
Commissioners,  favors  the  general  property  tax  and  the  appraisal 
of  mines  upon  the  ad  valorem  basis  after  the  methods  developed 
in  Michigan. 

Dr.  C.  K.  Leith,  who  has  had  extensive  experience  in  the  ap- 
praisal of  iron  mines  and  lands,  was  a  member  of  the  Committee 
on  Taxation  of  Mines  and  Mineral  Lands  appointed  by  the  Na- 
tional Tax  Association  which  favored  the  general  property  tax 
and  careful  appraisal.11 

Mr.  W.  L.  Uglow,  in  a  recent  bulletin  of  the  Wisconsin 
Geological  and  Natural  History  Survey,12  favors  the  use  of  a 
method  of  equating  income  with  property  valuations  so  that 
mining  property  may  bear  its  fair  share  of  the  taxes.  A  factor 
is  determined  which  when  applied  to  the  general  property  tax 
rate  will  give  the  proper  rate  to  be  levied  upon  the  income  of 
the  mining  property.  This  procedure  is  recommended  particu- 

•Norris,  R.  V.  The  taxation  of  coal  lands.  Proceedings  American 
Mining  Congress,  1913,  XVI,  331. 

10Infra,  p.  250. 

"This  committee  endorsed  the  system  of  appraisal  now  in  use  in  the 
Lake  Superior  district  and  opposed  gross  and  net  methods  of  taxation. 
Infra,  p.  249. 

12Uglow,  W.  L.  A  study  of  methods  of  mine  valuation  and  assess- 
ment. Bulletin  XLI,  Wisconsin  Geological  and  Natural  History  Survey, 
Madison,  1914. 


240  MINE  TAXATION  IN  THE  UNITED  STATES  [770 

larly  for  short-lived  mines  that  have  relatively  little  ore  in  sight. 

Professor  J.  Daniels  in  an  address  at  the  Washington  State 
Tax  Conference  in  1914  favored  "some  form  of  nominal  hold- 
ing-tax on  the  land  until  it  develops  into  a  producing  property 
and,  when  the  mine  reaches  the  active  point  of  production,  the 
value  of  that  property  as  a  going  concern  should  be  used  as  the 
annual  basis  of  assessment  of  taxes."13 

Professor  M.  Roberts  in  discussing  the  address  by  Professor 
Daniels  said,  "It  seems  difficult  to  avoid  making  use  of  the  gen- 
eral property  tax  in  some  degree  in  taxing  mining  property. 
In  an  undeveloped  district  the  holding-tax  should  be  quite  light. 
In  developed  districts  and  where  there  is  regularity  to  the 
deposits  it  can  be  somewhat  heavier."1* 

The  opinion  of  Hon.  E.  D.  Boyle,  Governor  of  Nevada,  is 
particularly  interesting  because  he  is  a  mining  engineer  and 
his  experience  as  a  state  official  has  given  him  an  intimate 
knowledge  of  the  problems  of  providing  public  revenue.  In  a 
paper  on  "Mine  Taxation,"  after  discussing  the  gross  income 
tax  on  railroads  and  other  utilities,  he  concludes:  "Granting 
then,  that  a  royalty  system  of  commutated  taxation  as  applied 
to  the  public  utilities  has  proven  a  workable  and  generally  satis- 
factory proposition,  why  not  apply  it  to  the  mines?  The  mine, 
unlike  the  railroad  once  under  exploitation,  can  show  an  income 
only  by  the  extinguishment  of  its  capital.  It  is  obvious  there- 
fore that  in  determining  the  percentage  of  the  mine's  gross 
income  to  be  paid  we  must  take  this  fact  into  account  and  the 
rate  of  the  royalty  should  be  such  as  to  fairly  well  equalize  the 
assessments  between  the  two  classes  of  property.  Since  the  mine 
is  usually  practically  valueless  when  the  mine  is  exhausted,  im- 
provements should  be  considered  as  a  part  of  the  mine — no  tax 
levied  against  them  other  than  the  one  royalty  against  the  whole 
property.  An  analysis  of  this  system,  using  2  per  cent  of  the 
gross  income  as  the  basis  of  the  tax,  based  on  the  experience  of 
the  leading  properties  of  Nevada  for  its  past  two  years  indicates 
that  (1)  the  Nevada  mines  would  pay  65  per  cent  more  taxes 
than  they  do  at  present;  (2)  with  few  exceptions  among  the 
larger  mines  the  percentage  of  the  capital  value,  as  far  as  the 
same  may  be  estimated,  paid  annually  in  royalty  would  be  less 
than  one  per  cent, — this  figure  being  deemed  to  represent  a  fair 

"Daniels,  J.     Taxation  of  mineral  lands.     Bulletin  of  University  of 
Washington,  General  Series  No.  84,  August  1914,  p.  88. 
"/Me/.,  p.  89. 


771]  SUGGESTED  REFORMS  241 

proportion  of  capital  value  taken  in  taxes  annually  on  all  prop- 
erty throughout  the  United  States;  (3)  low-grade  mines  pro- 
ducing large  tonnages  with  a  small  margin  of  profit  do  not  ap- 
pear to  be  more  adversely  affected  than  the  higher  grade  mines, 
owing  to  the  fact  that  the  exemption  of  their  usually  large  and 
expensive  plants  acts  in  a  compensatory  manner.  It  appears  to 
me  that  the  gross  proceeds  tax,  perhaps  modified  in  the  cases  of 
certain  mines  operating  under  adverse  conditions,  is  just  as 
rational  and  just  as  scientific  in  actual  practical  operation  as  any 
of  the  systems  thus  far  proposed.  If  this  be  true  it  is  certainly 
the  simples  and  deserves  a  trial  somewhere  in  the  west."14* 

Mr.  F.  F.  Sharpless,  a  well-known  mining  engineer,  said : 

"While  we  may  not  all  agree,  evidently  we  do  not  agree, 
upon  a  proper  basis  of  taxation,  we  can  and  do  agree  upon  the 
proposition  that  mines  should  not  bear  more  than  their  due 
proportion  of  the  burdens  of  the  community.  Professors  of 
economics  and  tax  experts  may  be  able  to  enlighten  us  on  the 
technique  of  assessment  and  the  collection  of  taxes,  but  unless 
they  are  fully  informed  as  to  the  nature  of  the  mining  business, 
and  wherein  it  differs  from  other  commercial  enterprises,  and 
wherein  one  type  of  mining  differs  from  another  type,  such  ex- 
perts will  not  be  able  to  do  justice  to  the  mining  business.  The 
majority  of  mining  men  are  honest  and  are  willing  to  pay  their 
due  proportion  of  taxes.  The  majority  of  assessors  are  honest, 
and  desire  to  tax  justly.  What  then  is  needed  is  co-operation 
between  these  two  classes  of  citizens.  Lobbying  with  law-makers 
may  yield  temporary  relief,  but  this  is  not  what  is  required. 
Education  of  the  miner  as  to  methods  of  taxation,  and  education 
of  assessors  as  to  the  nature  of  the  business  they  are  assessing  is 
more  to  the  point.  There  must  be  co-operation,  instructive  and 
constructive,  or  mining  taxes  will  grow  rapidly." 

In  objecting  to  the  arbitrary  and  unscientific  methods  gen- 
erally employed  in  the  valuation  of  coal  lands  for  the  purpose  of 
taxation,  Mr.  S.  A.  Taylor  said : 

"In  order  to  arrive  at  a  fair  conclusion  or  fair  valuation  it 
would  probably  require  some  persons  of  more  expert  knowledge 
of  the  value  of  coal  lands  than  is  generally  possessed  by  asses- 
sors, and  while  I  realize  that  the  person  or  persons  who  would 

14aBoyle,  E.  D.  Mine  taxation.  Proceedings  of  National  Tax  Asso- 
ciation, 1915,  IX,  80. 

14bPaper  before  Mining  and  Metallurgical  Society  of  America.  Min- 
ing and  Engineering  World,  1915,  XLII,  1168. 


242  MINE  TAXATION  IN  THE  UNITED  STATES  [772 

be  most  capable  of  serving  on  such  a  commission  would  be 
selected  from  among  those  having  a  broad  experience  in  investi- 
gating virgin  coal  lands,  in  the  actual  operation  of  mines,  and  in 
the  selling  or  marketing  of  the  product  of  the  mines,  and  might 
cost  the  districts  that  are  levying  the  taxes  some  money  for  a  re- 
port on  the  values  within  the  district,  yet  in  the  end  I  believe 
that  if  this  plan  were  adopted,  it  would  give  more  general  satis- 
faction, in  that  it  would  be  more  equitable." 

In  a  conference  between  representatives  of  Arizona  mining 
companies  and  the  members  of  the  Arizona  Tax  Commission 
held  October  29,  1912,  the  representatives  of  the  mining  com- 
panies made  the  following  proposal : 

1.  That  all  patented  mines  be  assessed  per  acre  at  the 
price  paid  to  the  United  States  Government  therefor. 

2.  That  all  improvements  upon  said  mines  be  assessed 
by  the  State  Tax  Commission  at  the  same  value  as  other 
property. 

3.  That  the  net  earnings  from  said  mines  be  ascer- 
tained and  assessed  at  100  percent,  of  the  true  value  thereof. 

4.  That  in  addition  thereto  all  producing  mines  be- 
assessed  upon  12.5  percent,  of  the  gross  product  or  yield 
thereof  in  value.15 

STATE  OFFICERS  AND  TAX  COMMISSIONERS. 

State  officials  and  members  of  the  tax  commissions  are  fre- 
quently obliged  to  consider  "policy  and  expediency"  as  well  as 
the  ' '  canons  of  taxation. ' '  However,  it  may  be  assumed  that  the 
executive  officers  of  the  state  are  interested  in  administrative- 
problems  which  have  to  do  with  productivity,  economy,  elasti- 
city, and  certainty  of  a  revenue-producing  system.  In  the  admin- 
istration of  mine  taxation  in  the  various  states  that  employ  tax: 
commissions  the  problems  peculiar  to  mine  taxation  have  re- 
ceived special  attention  and  from  time  to  time  the  reports  of  the 
tax  commissions  have  carried  recommendations  to  the  state  legis- 
latures. Following  is  a  condensed  statement  of  a  number  of  these 
recommendations  which  have  not  been  formulated  into  laws. 

14«Taylor,  S.  A.  Valuation  of  coal  lands.  American  Coal  Journal^ 
October  16,  1915. 

16First  Report,  Arizona  State  Tax  Commission,  1912,  p.  63.  The 
Arizona  legislature  enacted  a  law  effective  in  1913  and  1914,  providing 
that  producing  mines  be  assessed  at  400  percent  of  the  net  earnings  plus. 
12.5  percent  of  the  gross. 


V73]  SUGGESTED  REFORMS  243 

The  Minnesota  Tax  Commission  in  1902  regretted  that  the 
•constitution  of  the  state  did  not  permit  the  enactment  of  a  ton- 
nage tax.  In  the  opinion  of  the  members  of  the  Commission  "a 
tonnage  tax  is  the  only  appropriate  means  for  the  taxation  of  the 
output  of  mines."18 

Again  in  1908,  the  Minnesota  Commission  pointed  out  the 
desirability  of  a  tonnage  tax  although  at  that  time  most  of  the 
members  were  apparently  reconciled  to  the  working  of  the  gen- 
eral property  tax.  Mr.  O.  N.  Hall  filed  a  minority  report  oppos- 
ing the  endorsement  of  a  tonnage  tax  by  the  Tax  Commission.17 

A  tonnage  tax  is  not  favored  now  by  the  Minnesota  Tax 
Commission  as  it  is  claimed  that  it  would  require  a  graduated 
tonnage  rate,  which  would  be  more  complicated  than  the  system 
now  in  force.  This  graduated  rate  would  be  based  upon  the 
quality  of  the  ore,  cost  of  mining,  etc.  It  probably  would  be 
more  difficult  to  administer  than  the  general  property  tax. 

The  Wisconsin  Tax  Commission  in  1910  commented  on  the 
difficulty  of  assessing  mineral  land  and  said  :  "It  would  be  more 
logical  and  tend  to  better  administration  if  the  lands  were 
assessed  without  regard  to  the  minerals,  and  the  latter  sub- 
jected to  an  occupation  or  privilege  tax  when  extracted,  or  even 
included  under  the  income  tax."18 

The  message  of  the  Governor  of  Wisconsin,  January  12,  1911, 
contains  practically  the  same  statement.  He  suggested  that  the 
occupation  tax  should  be  proportionate  to  the  value  of  the  amount 
of  ore  removed. 

A  suggestion  of  the  Wisconsin  Tax  Commission  in  1915  was 
embodied  in  a  bill  to  create  Section  1053  of  the  Statutes  provid- 
ing for  the  valuation  and  assessment  of  lands  containing  deposits 
of  lead  and  zinc.  In  general,  the  proposed  plan  of  assessment 
was  an  attempt  to  equate  the  earnings  of  lead  and  zinc  mines 
with  the  valuation  of  property  ;  this  was  to  be  done  by  multiply- 
ing the  sum  of  the  royalties  paid  and  profits  earned  by  two  and 
four-tenths.  The  sum  so  obtained  was  to  constitute,  for  pur- 
pose of  taxation,  the  full  and  true  value  of  the  lands. 

It  has  been  suggested  by  tax  officials  in  Wisconsin  that 
society  might  receive  the  greatest  benefit  from  the  mineral  and 
other  resources  if  economical  development  and  use  were  made 
the  prime  object  rather  than  possible  revenue.  Mine  operators 


of  Tax  Commissioners,  1902,  p.  43. 
l7First  Biennial  Report,  Minnesota  Tax  Commission,  1908,  p.  146. 
lsFifth  Biennial  Report,  Wisconsin  Tax  Commission,  1911,  p.  16. 


244  MINE  TAXATION  IN  THE  UNITED   STATES  [774 

might  be  encouraged  or  forced  to  recover  a  maximum  percent- 
age of  the  mineral  if  wasteful  methods  were  penalized  by  taxa- 
tion.19 

In  discussing  the  separation  of  state  and  local  revenues  the 
Commission  of  Inquiry  into  Taxation  in  Michigan  in  1911  ad- 
vised that  "mining  corporations  should  not,  through  separation, 
be  exempted  from  the  burden  of  state  taxation,  and  a  part  of  the 
state  revenues  should  be  realized  from  the  mines. ' '  The  commis- 
sion recommended  further  that,  in  the  case  of  separation,  "for 
the  present  an  amount  equal  to  one-ninth  of  the  demands  of  the 
state  for  general  expenses  be  imposed  upon  mining  property."20 

Mr.  C.  M.  Zander,  a  member  of  the  Arizona  State  Tax  Com- 
mission, favored  taxing  mines  as  other  property  upon  an  ad 
valorem  basis.  He  believes  the  Michigan  system  can  be  adapted 
and  declares  the  only  administrative  difficulty  in  the  West  to  be 
' '  lack  of  power  by  a  central  authority.  As  soon  as  some  western 
state  delegates  that  power  a  great  advance  can  be  looked  for. '  '21 

On  the  other  hand  his  associate,  Mr.  P.  J.  Miller,  advocated 
as  strongly  the  taxation  of  mines  upon  the  basis  of  gross  and 
net  earnings.  His  recommendations  in  the  report  of  the  Tax 
Commissioners  were  as  follows : 

"That  a  specific  tax  law  be  enacted  similar  to  the  one 
passed  by  the  last  legislature  except  that  the  net  proceeds  alone 
be  made  the  basic  factor  and  increasing  the  multiple  from  four 
to  whatever  figure  the  legislature  may  think  proper. 

' '  That  by  eliminating  the  tax  on  the  gross  proceeds  and  fix- 
ing a  minimum  net  of  twenty-five  thousand  dollars  for  the  pro- 
ducing mines  will  put  the  larger  properties  in  a  class  by  them- 
selves and  tend  for  equity  in  assessments  between  them.  This  will 
also  prevent  properties  that  are  valuable  but  are  making  but  a 
small  net,  from  being  assessed  at  almost  nothing,  as  was  possible 
under  the  present  law. 

' '  That  all  surface  ground  of  mining  claims  lying  within  the 
corporate  limits  of  cities  or  towns,  whether  used  for  mining  or 
other  purposes,  be  assessed  as  other  real  estate  is  assessed  and 
taxed  in  said  cities  or  towns. 

"Compare  with  L.  C.  Gray's  statement,  Qttarterly  Journal  of  Eco- 
nomics, 1914,  XXVIII,  486;  Uglow,  W.  L.,  Bulletin  XLI,  Wisconsin  Geo- 
logical and  Natural  History  Survey,  46;  and  Report  of  Committee  on  Tax- 
ation of  Mines,  Proceedings  of  National  Tax  Association,  1913,  VII,  387. 

20Report  of  Commission  of  Inquiry  into  Taxation,  Lansing,  1911,  p.  36. 

"Zander,  C.  M.  Taxation  of  metalliferous  mines.  Proceedings  of 
National  Tax  Association,  1914,  VIII,  338. 


775]  SUGGESTED  REFORMS  245 

"That  all  smelters,  mills,  and  reduction  works  owned  and 
used  in  connection  with  any  producing  mine  be  included  in  the 
value  of  the  mine. 

"That  in  case  a  producing  mine  closes  down  for  a  period  of 
three  months  or  more  on  account  of  litigation,  on  account  of  acci- 
dent, or  on  account  of  the  depreciation  of  the  value  of  its  product 
below  the  cost  of  production  or  for  any  other  reason,  the  State 
Tax  Commission  be  given  power  to  assess  that  mine  by  finding 
the  average  of  its  net  for  the  past  five  years  and  multiply  that 
sum  by  the  factor  provided  in  the  mine  tax  law,  the  resulting 
amount  to  be  the  assessable  value  of  said  mine. 

"That  a  section  should  be  included  in  the  mine  tax  law  em- 
powering the  State  Tax  Commission  to  prescribe  a  uniform  sys- 
tem of  accounting  for  all  producing  mines  in  order  that  the  'net 
proceeds'  be  arrived  at  uniformly."22 

Honorable  R.  E.  Sloan,  formerly  Governor  of  Arizona,  in 
an  address  made  before  the  Conference  of  Governors  in  1910, 
favored  taxing  the  gross  and  not  the  net  proceeds,  as  being  less 
inquisitorial  and  as  eliminating  all  questions  of  good  or  bad 
management.23 

Mr.  J.  B.  Phillips  stated  that  the  Colorado  Tax  Commission 
found  it  necessary  to  recommend  to  the  legislature  the  bill  chang- 
ing the  assessment  of  mines,  making  the  assessment  on  fifty  per- 
cent of  the  gross  and  all  of  the  net  from  metalliferous  mines. 
This  was  due  to  a  decision  of  the  Supreme  Court  defining  "gross" 
which  resulted  in  the  reduction  of  the  valuation  of  the  mines  of 
the  state  by  between  eight  and  nine  million  dollars.24 

The  Nevada  Bullion  Tax  Agent  in  1912  favored  a  graduated 
tax  on  gross  output,  rather  than  a  tax  on  net  output.28 

Mr.  C.  S.  Patterson,  of  the  Utah  Board  of  Commissioners  on 
Revenue  and  Taxation,  recommended  in  1912  that  mines  in  Utah 
be  classified  and  that  a  higher  and  graduated  rate  be  applied  to 
property  of  this  class  taxed  upon  net  proceeds.2* 

"Miller,  P.  V.  Assessment  of  mines.  Ibid.,  1913,  VII,  394-  Engi- 
neering and  Mining  Journal,  1913,  XCVII,  969. 

^Proceedings  Second  Meeting  of  Governor's,  Washington,  1910.  p. 
146. 

"Phillips,  J.  B.  Legislative  and  administrative  problems  in  Colo- 
rado. Proceedings  National  Tax  Association,  1914,  VIII,  96. 

26Report  of  Nevada  State  License  and  Bullion  Tax  Agent,  1912,  p.  8. 

2«Patterson,  C.  S.  Report  Special  Tax  Commission  of  Utah.  Pro- 
ceedings National  Tax  Association,  1912,  VI,  432. 


246  MINE  TAXATION  IN  THE  UNITED  STATES  [776 

Mr.  T.  C.  Townsend,  formerly  identified  with  the  work  of 
the  West  Virginia  Tax  Commission,  recommended  a  production 
tax  for  oil  and  gas  as  follows : 

"The  most  feasible,  scientific,  and  common-sense  method  of 
taxing  oil  is  to  impose  the  production  tax.  The  State  of  "West 
Virginia,  as  well  as  all  other  states  and  countries  that  produce 
oil,  ought  to  come  to  this  tax.  The  amount  should  not  be  great, 
perhaps  one-third  to  one-half  cent  per  barrel, — and  it  should  be 
used  exclusively  for  the  support  of  the  State  government.  In  oil- 
producing  states  this  tax  would  aid  largely  in  bringing  about  a 
divorcement  of  state  and  local  revenues,  an  end  much  desired  in 
the  tax  system  of  any  state.  It  is  thought  a  production  tax  could 
be  imposed  in  most,  if  not  all,  states  without  encountering  con- 
stitutional barriers.27  A  production  tax  on  natural  gas  is  the 
only  feasible  method  of  taxing  it  under  a  constitution  like  that  of 
"West  Virginia,  and  the  only  method  that  can  be  devised  that  will 
compel  this  class  of  property  to  bear  its  equal  share  of  the  bur- 
dens of  taxation."28 

In  outlining  a  model  system  of  state  and  local  taxation,  Mr. 
Lawson  Purdy  proposed  that  mineral  rights  should  be  included 
among  the  subjects  of  state  taxation  because,  "their  value  does 
not  depend  upon  local  expenditure,  or  the  value  of  the  local 
government  or  on  the  extent  of  local  population.  Deposits  of 
coal,  iron,  and  other  minerals  owe  their  value  to  the  demand  for 
their  use  by  the  country  as  a  whole."29  He  held  that  the  state 
should  receive  from  rich  and  profitable  mineral  deposits  a  revenue 
greater  than  that  which  would  be  secured  if  the  state  levy  were 
apportioned  according  to  local  expenditures.  Therefore,  the 
state  should  tax  mineral  rights  directly.  Ordinarily  a  state  tax 
on  mineral  rights  should  not  be  imposed  upon  the  site  value  of 
the  land,  because  the  surface  can  be  used  for  agriculture  or  other 
purposes,  while  mining  is  going  on  beneath  the  surface.  In  some 
cases  the  deposits  of  ore  are  so  close  to  the  surface  that  the 
operation  of  mining  the  ore  is  like  quarrying  stone.  In  this  case 
it  might  not  be  possible  to  allow  the  local  community  to  tax  the 
site  at  all,  and  provision  might  be  made  for  a  division  of  the 
proceeds  of  a  tax  on  the  mineral  rights.  With  the  exception  of 
such  mines  as  are  practically  quarries,  the  tax  for  state  purposes 

"Ibid.,  1908,  II,  407. 
™Ibid.,  II,  409. 

29Purdy,  Lawson.    Outline  of  a  model  system  of  state  and  local  taxa- 
tion.   Ibid.,  1907,  I,  63. 


777]  SUGGESTED  REFORMS  247 

-could  be  imposed  on  the  mineral  rights  alone,  and  the  local  tax 
districts  could  be  allowed  to  tax  the  surface  for  local  purposes. 

The  Committee  on  Taxation  of  Mines  and  Mineral  Lands  in 
its  report  to  the  National  Tax  Association,  in  1913,  recommended 
(1)  the  valuation  of  explored  and  developed  mines  as  other  prop- 
erty, and  (2)  indorsed  in  general  the  system  employed  in  Michi- 
gan, Minnesota,  and  Wisconsin.  The  Committee  opposed  (1) 
gross  and  net  methods  of  taxation  and  (2)  taxes  on  the  basis  of 
market  value  of  stocks.80 

ECONOMISTS. 

Dr.  L.  C.  Gray  holds  that,  "a  tax  on  the  mine  will  in  no  way 
affect  the  supply  of  the  product  placed  on  the  market  at  pres- 
ent" but  it  may  disturb  the  relation  between  present  and  future. 
Much  depends  on  the  manner  in  which  the  tax  is  applied.  An 
annual  tax  on  the  value  of  the  mine,  provided  the  tax  is  expected 
to  be  permanent,  ' '  will  increase  the  tendency  for  the  mine  owner 
to  remove  the  coal  in  the  present  rather  than  in  the  future.  This 
will  be  true  even  if  all  so-called  rent  and  a  part  of  the  royalty  is 
taken  by  the  tax.  Far  from  preventing  the  mine  from  being 
utilized,  it  will  actually  increase  the  amount  of  coal  placed  on  the 
market;  and,  if  demand  is  constant,  will  probably  lower  the 
price."  A  tax  upon  the  annual  surplus  will  not  have  this  effect 
but  will ' '  take  a  certain  share  of  each  dollar  of  surplus  whenever 
it  appears."31  A  tonnage  tax  at  a  fixed  amount  per  ton  will 
probably  encourage  a  slower  rate  of  utilization,  depending  upon 
the  present  value  of  the  product. 

Dr.  Frank  L.  McVey  in  an  address  on  a  "  rational  system  of 
taxing  natural  resources"  said,  " Without  question,  the  general 
property  tax,  as  it  now  stands  upon  the  statute  books  of  the  dif- 
ferent states,  does  not  meet  in  any  one  sense  of  the  term  the  gen- 
eral economic  conditions  and  the  special  needs  of  mining.  The 
same  principle  which  is  applied  in  the  case  of  timber  lands, 
namely,  the  taxation  of  the  product,  should  be  applied  to  the 
taxation  of  mineral  properties.  There  is  no  question  that  the 
easiest  way,  and  the  most  satisfactory  and  acceptable  way  to  all 
concerned,  is  a  tonnage  tax,  varying  possibly  with  the  character 
of  the  ore  and  the  cost  of  mining,  but  always  depending  for  the 
rate  and  the  amount  upon  the  ore  that  has  been  mined.  The 

««/&«*.,  1913,  VII,  387. 

31Gray,  L.   C.     Rent  under  the  assumption  of  exhaustibility.     Quar- 
terly Journal  of  Economics,  1914,  XXVIII,  466. 


248  MINE  TAXATION   IN   THE  UNITED   STATES  [778 

taxation  of  the  surface  upon  some  such  basis  as  that  seen  in  the 
case  of  the  timber  tax  will  provide  a  regular  income  supple- 
mented by  the  amount  of  the  tonnage  taxes.  The  real  essence  of 
the  tonnage  tax  lies  in  the  fact  that  value  found  in  the  ground  is 
distinctly  a  product  of  nature,  which  an  ad  valorem  tax  can  not 
recognize,  and  in  consequence  the  state's  right  to  a  share  of  the 
value  of  the  earth's  products,  together  with  the  diminishing  value 
element  involved,  is  overlooked. '  '32 

It  has  been  suggested  that  the  tax  rates  upon  certain  kinds 
of  mineral  properties  shall  be  progressive.  Professor  F.  W. 
Taussig  in  making  a  general  statement  regarding  progressive 
taxation  says  it  "is  not  practicable  on  the  basis  of  the  kind  of 
income.  It  is  susceptible  of  application,  on  a  wide  scale,  only 
with  reference  to  the  amount  of  the  income."33 

In  discussing  unearned  increment  as  applied  to  mines,  Pro- 
fessor Taussig  suggested  that  "it  is  difficult  to  see  how  any  other 
method  than  that  of  long  leases  could  secure  the  desired  ends, — 
the  effective  utilization  of  resources  and  the  conservance  of  the 
public's  fundamental  equity.  The  uncertainties  of  mining  are 
such  that  any  recurrent  carving  out  of  economic  rent  is  quite 
impracticable.  The  only  feasible  policy  would  be  that  of  allowing* 
private  enterprise  to  take  its  risks  and  reap  its  rewards  over  a 
stated  period.  No  doubt  the  possessor  or  tenant  during  his  term 
would  be  tempted  to  work  the  mine  to  the  utmost  and  perhaps 
exhaust  it ;  a  difficulty  possibly  to  be  met  by  requiring  the  pay- 
ment of  a  progressive  royalty  as  a  large  output  was  reached. 
Here  as  elsewhere,  occasional  great  gains  to  lucky  or  shrewd  in- 
vestors must  be  accepted  with  equanimity ;  a  policy  too  grasping- 
overreaches  itself."34 

From  the  foregoing  expressions  of  Professor  Taussig  it  is 
apparent  that  a  policy  of  distinguishing  the  income  of  mines  from 
income  derived  from  other  sources  and  taxing  the  mining  income 
under  progressive  rates  is  a  questionable  practice.  Similarly,  the 
suggestion  that  mines  be  singled  out  and  taxed  upon  unearned 
increment  is  not  favored  by  Professor  Taussig  and  a  number  of 
other  economists. 

In  discussing  the  fiscal  policy  and  mineral  deposits,  Pro- 
fessor H.  C.  Adams  says,  "Mines  that  are  widely  spread  and 

32Quarterly  Journal  of  University  of  North  Dakota,  Jan.,  1911,  pp.. 
146-151- 

88Taussig,  F.  W.    Principles  of  Economics,  II,  484. 
"Ibid.,  II,  101. 


779]  SUGGESTED  REFORMS  249 

easily  discovered  may  be  treated  like  the  property  of  ordinary 
industries.  No  special  financial  policy  is  required  for  minerals 
like  coal,  iron,  or  salt.  Mines,  on  the  other  hand,  which  form 
the  basis  of  a  natural  monopoly  should  be  handed  over  to  private 
enterprise  for  development,  but  they  should  at  the  same  time  be 
recognized  as  a  fit  object  for  special35  and  peculiar  taxation. '  '3e 

A  corporation  tax  is  favored  by  Professor  Adams  in  order  to 
reach  such  differential  profit  as  may  result  from  natural  monopo- 
ly or  specially  rich  deposits.37  The  basis  of  this  taxation  should 
be  the  royalty  which  ' '  particularizes  itself ' '  with  the  mineral  in- 
dustry.38 Natural  monopolies,  such  as  mines,  should  be  the  ob- 
ject of  state  taxation.39 

In  discussing  the  division  between  state  and  local  taxation, 
Professor  I.  A.  Loos  favors  state  taxation  of  mineral  rights.  "On 
the  basis  of  economic  analysis,  as  well  as  in  the  light  of  historical 
public  policy,  the  community  has  a  large  claim  upon  mineral  de- 
posits."40 He  suggests  that,  in  the  states  in  which  important 
mineral  deposits  are  situated,  there  be  undertaken  "legal  and 
constitutional  methods  of  approach  to  this  source  of  revenue. ' ' 

Professor  O.  D.  Skelton,  of  Queen's  University,  Kingston, 
Ontario,  advises  that  mineral  resources  should  be  reserved  for 
state  rather  than  local  taxation.41  If  adequate  taxes  were  im- 
posed on  mines  by  a  municipality,  more  revenue  would  often  be 
raised  than  is  legitimately  required.  Regarding  the  appraisal 
of  mining  property  he  comments  as  follows :  ' '  Any  estimate  of 
the  value  of  the  minerals  in  the  ground  must,  it  is  felt,  contain  a 
large  element  of  guess-work,  diligent  and  scientific  guess-work 
it  may  be,  but  guess-work  still."  He  therefore  prefers  a  tax  on 
the  output  or  net  profit  on  account  of  its  greater  certainty.  In 
his  opinion  a  satisfactory  and  more  or  less  uniform  system  of  ac- 
counting can  be  enforced  so  that  the  principal  objections  to  a  net 
profits  tax  can  be  overcome. 

''Discriminatory  legislation  would  be  unconstitutional  in  most  of  the 
important  mining  states. 

86Adams,  H.  C.     The  Science  of  Finance,  p.  239. 

"Ibid.,  p.  452. 

»•/«</.,  p.  464. 

S9Ibid.,  p.  501. 

*°Loos,  I.  A.  The  division  between  state  and  local  taxation.  Pro- 
ceedings of  National  Tax  Association,  1908,  II,  66. 

41Skelton,  O.  D.  The  taxation  of  mineral  resources  in  Canada.  Ibid.> 
1908,  II,  385. 


250  MINE  TAXATION  IN  THE  UNITED  STATES  [780 

Professor  T.  S.  Adams  in  discussing  the  practical  problems 
of  taxation  said :  ' '  There  is  one  fundamental  principle  that  men 
of  the  technical  type  particularly  forget,  and  that  is  that  taxes 
on  mines  must  in  some  way  be  equated  with  the  burden  of  taxa- 
tion resting  upon  other  property.  The  general  system  of  taxa- 
tion under  which  we  exist  is  a  property  tax,  not  an  income  tax, 
and  the  burden  of  property  taxes,  if  translated  into  terms  of  in- 
come taxation  requires  rates  so  excessive  that  the  ordinary  legis- 
lature will  not  impose  them.  If  the  burden  of  property  taxation 
is  to  be  translated  into  product  or  income  taxes,  then  the  average 
mine  owner  must  be  educated  up  to  endorse  and  accept  a  rate  of 
income  taxation  far  beyond  anything  which  he  has  heretofore 
considered^"42 

Professor  Seligman,  in  advocating  a  tax  on  income  rather 
than  a  tax  on  property,  said :  ' '  Let  us  recognize  the  fact,  once 
and  for  all,  that  a  system  of  property  taxation,  except  in  so  far 
as  certain  forms  of  real  estate  are  concerned,  is  unsuited  to  mod- 
ern economic  conditions  as  the  ordinary  and  principal  source 
of  revenue,  however  strong  the  arguments  may  be  for  its  utiliz- 
ation in  exceptional  crises  as  during  the  present  European  con- 
flict. Let  us  boldly  face  the  situation  and  confess  that  while  a 
classified  property  tax  may  constitute  the  only  possible  step  in 
advance  for  those  states  that  are  still  tied  up  by  a  rigid  constitu- 
tion, the  scheme  is  inapplicable  to,  or  undesirable  for,  those  states 
which  are  more  fortunately  situated  from  the  constitutional  point 
of  view;  and  that  even  in  the  former  class  of  states  the  energy 
that  is  being  developed  in  the  promotion  of  a  classical  property 
tax  might  more  profitably  be  directed  to  what  is  at  all  events  a 
more  thorough-going  remedy.  What  then  is  this  better  remedy 
and  what  is  the  next  step  for  states  like  New  York?  I  have  no 
hesitation  at  the  present  time  in  answering :  the  substitution  of 
income  for  property  as  the  basis  for  taxation."43 

SINGLE  TAX  PROGRAM. 

It  is  claimed  by  the  advocates  of  the  single  tax  that  taxation 
of  land  values  ' '  wiU  open  up  the  mineral  resources  of  the  country 
to  capital  and  labor.  By  stimulating  the  demand  for  labor  and 
undermining  the  power  of  monopoly  to  hold  mineral  lands  out  of 
use,  or  close  mines,  it  will  lead  to  an  enhancement  of  the  wage 
rate.  By  stimulating  production  and  operating  to  reduce  roy- 

42Proceedings  of  National  Tax  Association,  1913,  VII,  409. 
^Proceedings  of  National  Tax  Association,  1915,  IX,  134. 


781]  SUGGESTED  REFORMS  251 

alties,  it  will,  at  the  expense  of  the  monopolist,  cheapen  the  com- 
modity produced.  It  will  furnish  the  state  with  revenue,  with 
which  to  unburden  industry."  An  illustration  is  cited  of  an 
English  coal  mine  which  mined  846,642  tons  of  coal  in  a  given 
year.  The  company  paid  taxes  amounting  to  $27,490.  The  land 
owner  who  received  the  royalties  paid  $4,250  in  income  tax.  If 
the  royalties  be  capitalized  at  4  percent  and  taxed  at  the  pre- 
valent rate,  the  tax  would  be  $17,200  instead  of  $4,250.  It  is 
claimed  that  "such  an  impost  would  place  the  state  in  a  position 
to  substantially  relieve  the  mining  industry  of  present  rate  bur- 
dens, thus  giving  a  further  stimulus  to  legitimate  enterprise. '  '** 

The  single  tax  program  in  America  is  presented  in  the  writ- 
ings of  Mr.  E.  B.  Kirby  45  and  Mr.  R.  B.  Brinsmade.46  The  prin- 
cipal suggestion  of  this  program  is  that  a  separate  tax  levy  should 
be  made  on  mineral  land  and  improvements,  and  that  the  former 
should  then  be  increased  and  the  latter  diminished  until  specula- 
tive holders  are  obliged  either  to  sell  or  to  operate.  Mr.  Kirby 
objects  to  the  plan  of  taxing  successful  mining  operations  and 
exempting  unprofitable  mines  and  points  out  the  effects  af  apply- 
ing the  same  principle  to  other  forms  of  property  in  those  states 
in  which  mines  are  taxed  on  this  basis.  In  discussing  the  prob- 
lem of  valuing  mines  for  taxation  he  notes  that  "value  is  a 
market  fact,  and  not  what  some  one  thinks  it  ought  to  be."  He 
suggests  that  the  most  important  means  of  securing  accuracy  and 
fairness  in  assessment  of  mines  is  publicity,  "letting  every  man 
know  what  his  neighbor  pays." 

"The  scientific  principle  which  is  now  forcing  its  way  into 
the  taxation  systems  of  civilized  countries  is  that  the  burden 
must  be  carried  not  by  productive  industry,  as  at  present,  but  by 
natural  resources.  The  effect  of  this  upon  mining  would  be  to 
stimulate  the  active  operations  of  exploration,  discovery,  and  pro- 
duction and  to  discourage  speculative  holding  of  unused  mineral 
land."47  The  taxes  upon  operating  mines  would  be  greatly  re- 

"Chomley,  C.  H.  and  Outhwaite,  R.  L.  Land  Values  Taxation  in 
Theory  and  Practice.  London,  1909.  Chap.  IX,  p.  89. 

48Kirby,  E.  B.  Principles  of  mine  taxation.  Engineering  and  Mining 
Journal,  1911,  XCII,  853,  928.  Public,  1913,  XVI,  713. 

46Brinsmade,  R.  B.,  Natural  taxation  of  mining  land.  Mining  World, 
1909,  XXXI,  1023.  Discussion  of  J.  R.  Finlay's  paper  on  "Valuation  of 
iron  mines."  Transactions  of  American  Institute  of  Mining  Engineers, 
1914,  XLV,  324. 

*7Kirby,  E.  B.    Public,  XVI,  714. 


252  MINE  TAXATION  IN  THE  UNITED  STATES  [782 

duced  and  eventually  all  taxes  upon  machinery,  equipment,  im- 
provements, or  production  would  cease  and  the  only  tax  remain- 
ing would  be  that  upon  the  value  of  the  land  on  which  the  mines 
are  located.  In  the  opinion  of  Mr.  Kirby,  this  will  encourage 
prospecting  and  the  development  and  operation  of  mines.  The 
extent  of  the  speculative  holdings  of  mineral  land  is  so  great  that 
it  is  believed  the  state  would  secure  adequate  revenue  by  shifting 
the  tax  burden  to  such  lands. 

Similar  ideas  have  been  advanced  by  Mr.  Brinsmade  and  the 
suggestion  is  made  that  mine  operators  should  assess  their  own 
property  with  the  understanding  that  the  state  may  purchase  it 
within  a  year  at  the  assessed  value. 

Mr.  C.  B.  Fillebrown  urges  that  monopolies  and  special 
privileges  should  properly  share  with  land  values  the  burden  of 
taxation  and  cites  particularly  natural  resources  privately 
owned,  such  as  gold,  silver,  copper,  iron,  and  coal  mines,  and  oil 
fields.48  Similar  views  are  held  by  Mr.  T.  G.  Shearman.*9 

CONCLUSIONS. 

It  is  evident  that  the  taxation  of  mines  as  conducted  in  sev- 
eral states  has  aimed  at  more  than  the  raising  of  revenue  for 
immediate  public  needs.  The  conclusions  presented  herewith 
have  been  reached  under  the  presumption  that  taxes  upon  mines 
are  levied  for  the  single  purpose  of  providing  public  revenue. 
However  important  government  regulation  of  the  use  of  mineral 
resources  may  be,  it  has  not  been  considered  as  the  controlling 
purpose  in  taxation  or  the  purpose  that  makes  taxation  necessary. 
It  has  been  deemed  inadvisable  in  this  study  to  attempt  to 
present  a  program  of  mine  taxation  that  would  not  fit  into  the 
general  methods  of  taxation  now  employed  in  the  states,  for  it  is 
possible  that  the  system  of  taxation  that  is  ideal  from  the  view- 
point of  the  mining  industry  would  be  entirely  impractical  for 
other  industries  or  unconstitutional  in  many  of  the  states. 

It  is  difficult  to  answer  the  general  question  "Are  mines  pay- 
ing their  share  of  the  taxes  ? "  It  has  been  pointed  out  in  specific 
instances  that  from  the  data  available  it  may  be  inferred  that 
certain  types  of  mining  property  are  not  paying  their  share  of  the 
taxes  collected  for  state  and  local  purposes.50  In  most  of  the  im- 

*8Fillebrown,  C.  B.    The  A.  B.  C.  of  Taxation.    N.  Y.,  1909. 
"Shearman,  T.  G.    Natural  Taxation.    N.  Y.,  1898. 
50S«/»ra,  p.  224. 


783]  SUGGESTED  REFORMS  253 

portant  petroleum  producing  states  the  petroleum  wells  are  pay- 
ing in  taxes  a  smaller  percentage  of  their  earnings  than  are  the 
coal  and  ore  mines.  In  a  number  of  the  western  states  the  per- 
centage of  net  earnings  paid  in  taxes  by  the  precious  metal  mines 
is  much  less  than  the  percentage  paid  by  the  Lake  Superior  cop- 
per and  iron  mines. 

It  may  be  appropriate  to  note  that  as  a  rule  the  general  fiscal 
policy  in  the  various  states  is  based  upon  the  annual  needs  and 
that  taxes  are  levied  annually  at  rates  sufficient  to  meet  the  ex- 
penditures (including  interest  on  bonds)  for  the  current  year. 
According  to  the  general  plan,  only  so  much  revenue  is  raised 
during  a  particular  year  as  is  required  for  that  year.  This  fiscal 
plan  does  not  fit  in  well  with  what  seems  to  be  a  convenient  and 
just  plan  of  mine  taxation,  namely,  that  the  aggregate  taxes  paid 
by  a  mine  during  its  life  should  be  a  fair  share  of  the  total  earn- 
ings of  the  mine  and  at  the  same  time  a  fair  share  of  the  total 
taxes  raised  during  the  same  period  for  state  and  local  purposes. 
During  the  most  profitable  years  of  the  mine's  operations  the 
total  amount  of  revenue  required  may  be  small  and  the  amount 
of  taxes  paid  by  the  mine  may  be  proportionately  small ;  while, 
in  the  unprofitable  years  of  the  mine 's  operations,  and  when  there- 
fore its  appraised  valuation  is  low,  the  amount  of  public  revenue 
required  may  be  large.  It  would  be  just  to  consider  the  entire 
life  of  a  mine  and  in  some  way  to  adjust  the  tax  burden  to  the 
varying  needs  of  the  community.  Some  of  the  distinctive  char- 
acteristics of  mining  would  thus  be  recognized.  The  system  of 
taxing  property  in  general  upon  an  ad  valorem  basis  fails  to 
meet  this  situation,  for,  as  has  been  noted  previously,  a  mine  may 
partially  escape  taxation  by  increasing  the  annual  output  and 
thus  rapidly  exhausting  the  mineral  deposit  so  that  the  number 
of  years  during  which  the  mine  is  subject  to  taxation  is  reduced. 

As  previously  noted  the  constitutions  of  some  of  the  states 
limit  or  prescribe  the  method  of  taxation.  While  the  constitu- 
tions of  several  states  have  been  amended  in  order  to  permit 
special  methods  of  taxing  mines,  the  difficulty  of  amending  a 
state  constitution  is  so  great  in  some  instances  that  a  program  of 
taxing  mines  that  would  require  the  amending  of  a  state  consti- 
tution is  not  presented. 

It  is  suggested  in  general  that  the  tax  system  should  be  de- 
signed so  that: 

1.  The  taxes  levied  upon  the  mining  industry  will  be  no 
heavier  than  those  levied  upon  other  industries. 


254  MINE  TAXATION  IN  THE  UNITED  STATES  [784 

2.  The  methods  of  administration  will  be  no  more  inquisi- 
torial in  relation  to  mining  than  in  relation  to  other  industries. 

3.  Systematic  exploration  and  development,  efficient  opera- 
tion, and  production  of  the  maximum  total  tonnage  from  each  de- 
posit will  be  encouraged. 

4.  Proper  cognizance  will  be  taken  of  the  fact  that  mine 
openings,  buildings,  and  much  equipment  have  value  only  when 
there  is  a  mineral  deposit  available  for  working  and  that  the 
equipment  and  openings  practically  become  of  no  value  after 
such  a  deposit  has  been  worked  out. 

The  essential  differences  between  the  systems  of  taxing  mines 
now  employed  in  the  states  have  been  presented  and  in  review  it 
may  be  noted  that : 

1.  The  general  property  tax  is  not  adapted  to  mines  and 
mineral  lands  unless  they  are  valued  by  competent  appraisers, 
preferably  under  state  supervision. 

2.  The  gross  receipts  tax  does  not  secure  equality  and 
justice. 

3.  The  net  receipts  tax  may  be  desirable  in  the  form  of  a 
state  income  tax  applying  to  all  property.    The  accounting  should 
be  regulated  by  state  officers,  preferably  under  civil  service.  The 
Wisconsin  system  of  taxing  incomes  is  recommended. 

4.  Tonnage  taxes  are  unequal  and  unjust. 

5.  The  statutory  definitions  of  real  estate  and  of  personal 
property  should  be  specific  and  definite  enough  to  include  all 
forms  of  mining  property  and  all  rights  appertaining  to  mines, 
such  as  mineral  lands,  mining  rights,  leaseholds,  plant,  equip- 
ment, improvements,  broken  ore51  or  stored  mineral,  and  royalties. 

The  important  questions  attracting  the  attention  of  the  tax 
officials  and  mine  operators  are  notably  the  following: 

1.  What  mining  property  shall  be  taxed? 

2.  Who  shall  tax  it? 

3.  How  shall  it  be  taxed  ? 

B1The  distinction  between  ore  in  place  and  mined  ore  has  been  made 
in  certain  states.  Few  states  have  actually  carried  out  fully  the  distinc- 
tion that  ore  as  soon  as  broken  and  while  remaining  underground  becomes 
personal  property.  It  would  apparently  work  a  hardship  on  a  number 
of  large  mines  that  store  underground  immense  quantities  of  broken 
mineral  if  this  material  was  taxed  annually  as  personal  property  at  its 
full  market  value.  Apparently  no  state  has  yet  passed  upon  this  impor- 
tant question,  although  the  courts  have  held  that  broken  mineral  under- 
ground is  personal  property. 


785]  SUGGESTED  REFORMS  255 

4.  How  shall  it  be  valued?  and 

5.  At  what  rate  shall  it  be  taxed  ? 

1.  The  conclusion  that  has  been  reached,  after  an  investi- 
gation of  the  data  at  hand,  is  that  all  forms  of  mining  property 
should  be  taxed  according  to  their  true  present  value.    The  prac- 
tice of  exempting  mines  from  taxation  does  not  tend,  in  the  long 
run,  to  make  the  mining  industry  an  asset  to  the  community. 

2.  The  question  as  to  whether  mines  should  be  the  subject 
of  state  taxation  alone  or  of  both  state  and  local  taxation  has 
aroused  much  discussion.    The  weight  of  opinion  seems  to  be  in 
favor  of  the  latter  but  with  the  rate  of  local  taxation  limited  by 
state  law.52    If  the  local  units  are  not  permitted  to  tax  mines, 
many  mining  districts  would  not  be  able  to  secure  adequate  pub- 
lic revenue  without  imposing  an  unjust  burden  upon  the  owners 
of  other  property  in  the  community. 

3.  As  most  of  the  state  constitutions  prescribe  that  taxes 
upon  all  property  shall  be  uniform,  the  general  property  tax  has 
been  employed  extensively   and  is  at  present   the   prevailing 
method,  in  fact,  under  existing  conditions,  it  seems  to  be  the  most 
feasible,  just,  and  economical  method  of  taxing  mines  and  min- 
ing property. 

4.  The  foregoing  statement  is  conditioned  upon  a  scientific 
appraisal  by  officers  working  under  centralized  administration. 
If  all  property  is  appraised  at  its  full  value,  mines  and  mineral 
lands  will  bear  their  proper  share  of  the  taxes  if  it  is  planned 
that  taxes  shall  be  uniform  upon  all  property.    Under  such  a 
centralized  system  of  appraisal,  the  accounting  problems  will  be 
less  difficult  for  the  appraiser,  the  depreciation  of  mines  will  be 
provided  for  adequately,  and  the  technical  problems  in  general 
will  be  less  intricate. 

It  has  been  urged  that  special  methods  of  taxation  should 
be  provided  for  the  different  types  of  mining  property.  Particu- 
lar mention  has  been  made  of  three  types  of  producing  mines, 
namely,  (1)  those  operating  at  a  profit,  (2)  those  developed  but 
unprofitable,  and  (3)  those  being  developed.  Special  methods 
have  been  suggested  for  unproductive  mineral  property  such  as 
(4)  property  equipped  but  not  being  operated,  (5)  property 

62Supra,  p.  249.  A  number  of  economists  favor  state  taxation  of 
mineral  resources  and  local  taxation  of  the  improvements,  equipment,  and 
surface  rights.  Professor  Taussig  recommends  that  taxes  upon  real  prop- 
erty be  relegated  to  the  local  taxing  bodies.  (Principles  of  Economics, 
II,  527). 


256  MINE  TAXATION  IN  THE  UNITED  STATES  [786 

equipped  and  being  operated,  (6)  property  unequipped  but  ex- 
plored, and  (7)  unexplored  mineral  land.  From  time  to  time 
property  of  all  the  types  noted  is  appraised  for  the  purpose  of 
purchase  or  sale.  There  is  apparently  no  reason  why  similar 
methods  of  appraisal  may  not  be  employed  for  the  purposes  of 
taxation.  Under  such  circumstances  there  appears  to  be  no  valid 
reason  for  providing  a  special  method  of  taxation  for  these  types 
of  mining  property. 

5.  The  state  constitutions  of  a  number  of  the  states  specify 
that  the  rate  of  taxation  shall  be  uniform  upon  all  property.  The 
suggestions  that  the  general  tax  rate  be  graduated  and  applied  to 
mines  assessed  in  an  arbitrary  manner  according  to  state  laws 
appear  to  be  inadvisable.  If  mines  and  all  other  property  are  as- 
sessed at  full  value,  the  rate  of  taxation  should  be  the  same  on 
all  property. 

If  mines  are  to  be  taxed  upon  income,  it  is  suggested  that 
the  rate  be  graduated  according  to  the  rate  of  return  upon  the 
cost  of  the  mine  or  the  actual  paid-in  capital.  This  suggestion 
is  made  upon  the  assumption  that  all  industries  and  corporations 
will  be  taxed  in  the  same  manner.  In  this  way  part  of  the  un- 
earned increment  will  be  taken  by  the  state.  An  income  tax 
which  is  graduated  according  to  the  earnings  of  a  corporation 
and  which  does  not  consider  the  actual  capital  invested  discrimi- 
nates in  favor  of  the  small  corporation  or  the  small  mine. 

SUMMARY. 

Under  the  presumption  that  taxes  paid  upon  mines  are 
levied  for  the  single  purpose  of  providing  the  necessary  public 
revenue,  the  following  principles  are  advocated: 

1.  "When  the  state  constitution  prescribes  that  taxes  shall 
be  uniform  upon  all  property,  a  centralized  system  of  appraisal, 
similar  to  the  Michigan  plan,  is  desirable. 

2.  When  the  state  constitution  specifies  that  taxes  shall  be 
uniform  upon  all  property  in  the  same  class,  all  property — in- 
cluding mines  and  mineral  lands — should  be  appraised  at  full 
value,  and  the  taxes  upon  mines  should  be  equated  as  nearly  as 
possible  with  the  tax  burden  upon  other  property. 

3.  When  the  state  constitution  prescribes  no  limitations 
upon  taxation,  the  taxes  upon  mines  should  be  equated  as  nearly 
as  possible  with  the  tax  burden  upon  other  property.     Under 
these  conditions,  mines  should  be  valued  according  to  some  ap- 
proved system  of  appraisal  like  the  Michigan  system  or,  in  the 


787]  SUGGESTED  REFORMS  257 

case  of  short-lived  mines,  the  present  value  should  be  estimated 
according  to  the  ratio  between  the  income  of  the  mine  under  con- 
sideration and  that  of  a  mine  of  the  same  type  which  has  been 
regularly  inspected  and  appraised. 

4.  When  the  state  constitution  permits  taxes  upon  income 
and  progressive  taxation,  the  tax  should  be  graduated,  not  upon 
total  income  but  upon  the  percentage  of  earnings  on  the  cost 
of  the  mine  or  on  the  paid-in  capital  of  the  corporation. 

5.  Mines  should  be  taxed  for  both  state  and  local  purposes, 
the  local  rate  being  limited  by  state  law. 


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INDEX 

Accounts  of  mines,  (note)  148,  207,  208;  under  New  Mexico  statute,  104, 
207. 

Adams,  H.  C,  on  mine  taxation,  248. 

Adams,  T.  S.,  on  mine  taxation,  250. 

Administration  of  mine  taxation,  problems  of,  153. 

Alabama,  assessed  value  of  coal  lands  in,  162,  164;  constitution  and  statu- 
tory enactments  of,  81 ;  taxes  paid  by  mining  industry  in,  in  1909, 
21 1 ;  taxes  paid  by  coal  mines  in  1909,  213;  by  iron  mines  in  1909, 
215;  by  quarries  in  1909,  222. 

Allen,  R.  C.,  recommendation  on  taxation  of  mines  by,  239. 

Anthracite  mines  and  lands,  appraisal  of,  for  taxation,  (note)  238,  204. 

Anthracite  tax,  in  Pennsylvania,  68,  ill. 

Appraisal  of  mines  for  taxation,  153;  by  property  owner,  251;  cost  of, 
in  Minnesota,  185;  in  Michigan,  193;  in  Wisconsin,  197. 

Arizona,  appraisal  of  mines  by  Arizona  tax  commission,  196;  assessed 
value  of  mining  property  in,  in  1911-1916,  231;  constitutional  and 
statutory  enactments  of,  82;  notes  on  experience  of,  in  taxing  mines, 
39;  proposal  of  mine  operators  of,  in  1912,  242;  recommendations 
on  mine  taxation  in,  by  P.  S.  Miller,  244;  recommendations  by  R.  E. 
Sloan,  245 ;  recommendations  by  C.  M.  Zander,  244 ;  taxes  paid  by 
mines  in  1909,  211,  214,  216,  223. 

Arkansas,  assessed  value  of  coal  lands  in,  164;  constitutional  and  statu- 
tory enactments  in,  83;  exemptions  from  taxation  in,  in  1874-1881,  24; 
historical  notes  on  mining  in,  14;  taxes  paid  by  mines  in,  in  1909, 
211,  213,  217,  218,  222. 

Assessment  of  coal  lands,  135,  165,  166,  204. 

Assessment  of  mines,  arbitrary  method  of,  by  law,  138;  by  sales  method, 
135;  coal,  165,  166,  204;  in  Nevada,  59,  100;  in  New  Mexico,  102;  in 
Pennsylvania,  135,  166,  204;  in  Utah,  70;  in  Virginia,  72;  in  Wiscon- 
sin* 75,  76;  in  Wyoming,  76;  of  petroleum  wells,  168;  on  capitalized 
earnings,  136;  on  market  value,  135;  on  market  value  of  output,  139; 
under  various  state  laws,  81-121,  199. 

Bibliography,  on  history  of  mining  in  United  States,  27;  on  valuation  of 
coal  mining  properties,  (note)  166;  on  valuation  of  gold  placers, 
(note)  167;  general,  258-266. 

Bounties,  25. 

Boyle,  E.  D.,  opinion  of,  on  methods  of  taxing  mines,  240. 

Brinsmade,  R.  B.,  on  effect  of  taxes  on  valuation  of  mines,  174;  on  pro- 
posed method  of  taxing  mines,  251. 

Broken  ore,  classification  of,  in  appraisals,  (note)  254. 

Burden  of  taxation,  210-233;  in  California,  202. 

California,  appraisal  of  mines  in  Amador  County,  200;  constitutional  and 
statutory  enactments  of,  83;  question  of  regalian  rights  in,  17;  taxes 
paid  in,  in  1909,  211,  216. 

267 


268  MINE  TAXATION  IN  THE  UNITED  STATES  [798 

Canada,  output  tax  in,  (foot  note)  144. 

Capitalization  of  earnings,  as  basis  for  appraisal,  137. 

Chance,  H.  M.,  on  methods  of  appraising  mines,  153,  165;  recommendation 

of,  on  methods  of  taxation,  237. 

Channing,  J.  Parke,  recommendation  of,  on  methods  of  taxation,  236. 
Classification  of  mines   for  taxation,  in  Arizona,   198;   in  Colorado,  85; 

in  Minnesota,  97;  in  Nevada,  58;  in  New  Mexico,  102;  in  Oklahoma, 

65 ;  in  Wisconsin,  197. 
Coal  lands,  assessed  value  of,  (tables)   162-164;  bibliography  on  valuation 

of,   166;  methods  of  assessment,   165,  204;  valuation  of,  by  United 

States  Geological  Survey,  165. 

Coal  leaseholds,  assessment  of,  in  the  various  states,  172. 
Coal  mines,  appraisal  of,  161 ;  taxes  paid  by,  in  1909,  213,  227. 
Colonial  grants  of  minerals,  n. 
Colorado,  assessed  value  of  coal  lands  in,  163,  164,  232;  assessed  value  of 

mines  in,  in  1913  and  1914,  231 ;  assessed  value  of  mining  property, 

227 ;  constitutional  and  statutory  enactments  in,  84 ;  exemptions  from 

taxation  in,  24;  experience  of,  in  taxing  mines,  44-47;  taxes  paid  by 

mines  in,  in  1909,  211,  213,  214,  216-218,  220;  J.  B.  Phillips  on  mine 

taxation  in,  245. 
Connecticut,   constitutional   and   statutory   enactments  in,   86;   taxes  paid 

by  mining  industry  in,  in  1909,  21 1,  220-223. 
Conservation,  as  affected  by  taxation,  243,  247. 
Constitutional  enactments,  by  states,  78-121. 
Copper  mines,  appraisal  of,  in  Arizona,  198;  in  Michigan,  186,  192;  taxes 

paid  by,  in  1909,  214,  225. 
Corporation  excise  tax,  30. 
Corporations,  state  taxes  on,  130. 

Daniels,  J.,  opinion  of,  on  methods  of  mine  taxation,  240. 
Definitions,  of  depreciation,  34,  (note)  207;  of  gross  value,  34;  of  income 

of  mines,  131;  of  a  mine,  10;  (note)  51,  (note)  136;  of  mineral,  10; 

of  mineral  land,  10;  of  royalties,  (note)  20,  35,  133. 
Delaware,  constitutional  and  statutory  enactments  in,  86;  taxes  paid  by 

mining  industry  in,  in  1909,  211,  220. 
Depreciation,  of  mines,  31,  34,  207;  as  applied  to  oil  properties,  35,  168, 

209;  in  proposal  for  appraisal  of  Nevada  mines,   (1913)   59;  under 

Federal  Income  Tax,  35,  207,   (note)  208. 
Earnings  of  mines,  nature  of,  19. 

Earnings  tax,  advantages  of,  149 ;  compared  with  other  taxes,  147 ;  objec- 
tions to,  149. 

Eckel,  E.  C,  on  valuation  of  iron  mines,  159. 
Equated  income  tax,  advantages  of,  151 ;  objections  to,  152. 
Exemptions   from   taxation,  23 ;   in   Louisiana,   50 ;   in   Michigan,   53 ;   in 

Vermont,  116. 
Federal  taxation,  29-36. 

Federal  title  to  minerals  in  public  domain,  14, 
Fillebrown,  C.  B.,  on  taxation  of  natural  resources,  252. 


799]  INDEX  269 

Finlay,  J.  R.,  appraisal  of  Michigan  mines  by,  53,  185;  on  depreciation, 
(note)  207;  on  importance  of  market  price  of  product  in  appraisals, 
141;  on  valuation  of  mines,  157;  recommendation  of,  on  method  of 
taxation,  236. 

Florida,  constitutional  and  statutory  enactments  in,  87 ;  taxes  paid  by  min- 
ing industry  in  1909,  211,  219,  221. 

Gas,  natural,  Louisiana  taxes  on,  50. 

General  property  tax,  122;  advantages  of,  142;  compared  with  other 
systems,  134;  disadvantages  of,  143,  247;  effect  of,  247. 

Georgia,  constitutional  and  statutory  enactments  in,  87 ;  taxes  paid  by 
mining  industry  of,  in  1909,  211,  215,  216,  220-222. 

Gold  mines,  appraisal  of,  in  Arizona,  198;  in  California,  200;  taxes  paid 
by,  in  1909,  216,  228,  230. 

Gold  placers,  appraisal  of,  166;  bibliography  on,  (note)  167. 

Gray,  L.  C,  recommendations  of,  on  mine  taxation,  247. 

Griffith,  W.,  on  appraisal  of  coal  lands,  206;  recommendation  of,  on 
method  of  taxing  mines,  238. 

Gross  proceeds,  as  basis  for  valuation,  139;  defined,  in  Arizona,  42;  de- 
fined, in  Colorado,  46;  objections  to,  as  basis  for  valuation,  139-140. 

Gross  proceeds  tax,  endorsed  by  R.  E.  Sloan,  245;  opposed  by  National 
Tax  Association  Committee,  247 ;  proposed  by  E.  D.  Boyle ;  in  Colo- 
rado, 45;  in  Michigan,  51;  in  Oklahoma,  64-66,  109,  124;  in  Penn- 
sylvania, 68,  124;  in  South  Carolina,  69,  112,  124;  in  Wisconsin,  76, 
119,  124;  in  Wyoming,  76,  121,  124. 

Gypsum  mines,  taxes  paid  by,  in  1909,  219. 

History,  of  mine  taxation  in  the  states,  37-77 ;  review  of  United  States 
mining,  25-28. 

Hoover,  H.  C.,  on  risks  of  mining,  157;  on  valuation  of  mines,  136,  155, 

157- 

Idaho,  constitutional  and  statutory  enactments  in,  88;  exemptions  from 
taxation  in,  24;  historical  notes  on  taxation  in,  48;  taxes  paid  by 
mining  industry  in,  in  1909,  211,  214,  216,  220-223. 

Illinois,  assessed  value  of  coal  lands  in,  162,  164;  constitutional  and  statu- 
tory enactments  in,  89;  historical  notes  on  mining  in,  14;  valuation  of 
petroleum  wells  in,  170;  taxes  paid  by  mining  industry  in,  in  1909, 
211,  213,  216,  217,  218,  221-223. 

Improvements,  taxation  of,  in  New  Mexico,  104. 

Income  of  mines,  defined,  131 ;  F.  W.  Taussig  on,  248. 

Income  tax,  advantages  of,  150;  equated,  151;  federal,  31-36;  objections 
to,  150;  Wisconsin,  120;  T.  S.  Adams  on,  as  applied  to  mines,  250; 
E.  R.  A.  Seligman  on,  250. 

Indiana,  assessed  value  of  coal  lands  in,  162;  constitutional  and  statutory 
enactments  in,  90;  taxes  paid  by  mining  industry  in,  in  1909,  21 1,  213, 
218,  221. 

Interest  rate,  in  valuation  of  mines,  159,  160,  167,  177,  182,  186,  189,  194, 
197,  198. 

Internal  revenue  taxes,  29. 


270  MINE  TAXATION  IN   THE  UNITED  STATES  [800 

Iowa,  assessed  value  of  coal  lands  in,  164;  constitutional  and  statutory  en- 
actments in,  91 ;  historical  notes  on  mining  in,  14 ;  taxes  paid  by  min- 
ing industry  in,  in  1909,  211,  213,  215,  217,  221. 

Iron  mines  and  lands,  appraisal  of,  in  Michigan,  187 ;  in  Minnesota,  175 ; 
in  Wisconsin,  194;  classification  of,  in  Minnesota,  176-183;  tonnage 
rates  employed  in  appraisal  of,  in  Minnesota,  176-179;  taxes  paid  upon, 
in  1909,  215,  226. 

Jarvis,  C.  E.,  on  appraisal  of  mines  in  Amador  County,  California,  200. 

Kansas,  assessed  value  of  coal  lands  in,  164,  204;  constitutional  and  statu- 
tory enactments  in,  91 ;  taxes  paid  by  mining  industry  in,  in  1909, 
211,  213,  217-219,  221-223. 

Kentucky,  assessed  value  of  coal  lands  in,  162,  164;  constitutional  and 
statutory  enactments  in,  92;  taxes  paid  by  mining  industry  in,  in  1909, 

211,  213,  2l8,  221-223. 

Kirby,  E.  B.,  on  methods  of  taxing  mines,  251. 

Land  tax,  graduated,  in  Oklahoma,  108. 

Lead  and  zinc  mines,  appraisal  of,  in  Wisconsin,  120;  taxes  paid  upon,  in 
1909,  217. 

Lease,  mining,  nature  of,  18;  taxation  of,  18,  133. 

Leaseholds,  taxation  of,  in  West  Virginia,  74,  118,  202;  in  Wisconsin,  132 ; 
valuation  of,  172. 

Leith,  C.  K.,  opinion  of,  on  taxation  of  mines,  239. 

Licenses,  federal  mining,  29 ;  in  Florida,  87 ;  in  Louisiana,  49,  50,  93. 

Lindley,  C.  H.,  definition  of  mineral  land  by,  10. 

Loos,  I.  A.,  on  mine  taxation,  249. 

Louisiana,  constitutional  and  statutory  enactments  in,  93 ;  exemptions  from 
taxation  in,  24;  historical  notes  on  taxation  in,  49;  taxes  paid  by 
mining  industry  in,  in  1909,  21 1. 

Maine,  constitutional  and  statutory  enactments  in,  93 ;  exemptions  from 
taxation  in,  23;  taxes  paid  by  mining  industry  of,  in  1909,  211,  220, 
224. 

Marshall,  A.,  on  nature  of  mining  royalties,  20. 

Maryland,  constitutional  and  statutory  enactments  in,  94;  taxes  paid  by 
mining  industry  of,  in  1909,  211,  213,  215,  220,  224. 

Massachusetts,  constitutional  and  statutory  enactments  in,  95;  taxes  paid 
by  mining  industry  of,  in  1909,  211,  220-223. 

McVey,  Frank  L.,  recommendations  on  mine  taxation,  247. 

Methods  of  mine  taxation,  122-133;  comparison  of,  134,  199,  201. 

Michigan,  appraisal  of  copper  mines  of,  186,  192;  appraisal  of  mineral 
rights  in,  172;  appraisal  of  mines  of,  by  J.  R.  Finlay,  185;  appraisal 
of  mines  of,  by  Michigan  Geological  Survey,  189;  constitutional  and 
statutory  enactments  in,  95 ;  exemptions  from  taxation  in,  24 ;  his- 
torical notes  on  mine  taxation  in,  51-54;  laws  governing  precious  metal 
lands  in,  17;  suggestions  of  Commission  of  Inquiry  in  Taxation  (1911), 
244;  system  of  appraisal  employed  in  1916  in,  189;  taxes  paid  by  min- 
ing industry  in,  211,  213-215,  219,  221-223;  tonnage  tax  in,  145-147. 

Michigan  Geological  Survey,  appraisal  of  mines  by,  189. 


801]  INDEX  271 

Miller,  P.  J.,  on  net  proceeds  tax,  344, 

Mine  plant,  appraisal  of,  in  Michigan,  193. 

Mineral  lands,  appraisal  of,  in  Michigan,  187,  192;  in  Minnesota,  176-182. 

Mineral  resources  of  the  United  States,  20. 

Mineral  rights,  taxation  of,  171;  in  Michigan,  172;  in  Minnesota,  184  in 
Wisconsin,  75;  taxation  of,  under  various  state  laws,  81-121;  valua- 
tion of,  172. 

Mineral  rights  and  sovereignty,  II. 

Mining  claims,  assessment  of,  in  Arizona,  proposed,  242;  in  California, 
200;  in  New  Mexico,  102,  104, 

Mining  property,  nature  of,  10. 

Minnesota,  classification  of  iron  mines  in,  176-183;  constitutional  and 
statutory  enactments  in,  96;  methods  and  experience  of,  in  assessing 
iron  mines,  175;  notes  on  experience  in  taxing  mines,  54,  55;  taxes 
paid  by  mining  industry  of,  in  1909,  211,  215,  220-223. 

Mississippi,  constitutional  and  statutory  enactments  in,  97;  taxes  paid  by 
mining  industry  of,  in  1909,  211. 

Missouri,  constitutional  and  statutory  enactments  in,  98;  historical  notes 
on  mining  in,  14;  taxes  paid  by  mining  industry  of,  211,  213,  215,  217, 
220-223. 

Montana,  constitutional  and  statutory  enactments  in,  08;  notes  on  experi- 
ence of,  in  taxing  mines,  55;  taxes  paid  by  mining  industry  of,  in 
1009,  211,  214,  216,  220-223. 

National  Tax  Association,  recommendations  of  Committee  of,  in  1913, 
247. 

Natural  gas  wells,  appraisal  of,  168. 

Nebraska,  constitutional  and  statutory  enactments  in,  99;  taxes  paid  by 
mining  industry  in  1909,  211,  221. 

Net  proceeds  tax,  125;  endorsed  by  P.  J.  Miller,  245;  in  Arizona,  40,  128; 
in  Colorado,  45,  47,  85,  127;  in  Idaho,  48,  89,  126;  in  Montana,  55,  09, 
126;  in  Nevada,  56,  59,  61,  100,  126;  in  New  Mexico,  62,  63,  103,  127; 
in  Utah,  70,  115,  127;  opposed  by  National  Tax  Association,  247. 

Nevada,  appraisal  of  mines  in,  202 ;  constitutional  and  statutory  enactments 
in,  100;  E.  D.  Boyle  on  taxation  in,  240;  notes  on  history  of  mine 
taxation  in,  56,  229;  taxes  paid  by  mining  industry  of,  in  1909,  211, 
214,  216,  217;  taxes  paid  in,  in  1912  and  1913,  232. 

New  Hampshire,  constitutional  and  statutory  provisions  in,  101 ;  exemp- 
tions from  taxation  in,  24;  taxes  paid  by  mining  industry  of,  in  1909, 
211. 

New  Jersey,  constitutional  and  statutory  provisions  in,  101 ;  taxes  paid 
by  mining  industry  of,  in  1009,  211,  215. 

New  Mexico,  constitutional  and  statutory  enactments  in,  102;  historical 
notes  on  taxation  in,  62-63 ;  taxes  paid  by  mining  industry  of,  in  1909, 
211,  213,  214,  216. 

New  York,  constitutional  and  statutory  enactments  in,  105;  taxes  paid 
by  mining  industry  of,  in  1909,  211,  215,  218,  219,  220-224. 


272  MINE  TAXATION  IN  THE  UNITED  STATES  [802 

Non-productive  mining  property,  taxation  of,  140. 

Norris,  R.  V.,  on  methods  of  assessing  coal  lands,  165,  204 ;  on  importance 
of  rate  of  exhaustion  in  valuation,  142;  recommendations  on  taxing 
mines,  239. 
North  Carolina,  constitutional  and  statutory  enactments  in,  106;  taxes  paid 

by  mining  industry  of,  in  1909,  21 1,  220. 
North  Dakota,  constitutional  and  statutory  enactments  in,  106;  taxes  paid 

by  mining  industry  in  1909,  21 1,  213. 

Northumberland  County,  Pa.,  report  of  Tax  Commission  of,  206;  recom- 
mendation of  Tax  Commission  of,  on  method  of  taxing  mines,  237. 
Ohio,  assessed  value  of  coal  lands,  162,  164;  constitutional  and  statutory 
enactments  in,  107 ;  historical  notes  on  mine  taxation,  63 ;  historical 
notes  on  mining,  13;  taxes  paid  by  mining  industry  in,  in  1909,  211, 
213,  215,  218,  221-223. 

Oil  and  gas,  taxation  of,  per  unit  of  output,  246. 
Oil  and  gas  producers,  taxes  paid  by,  in  1909,  218. 
Oil  and  gas  properties,  depreciation  of,  168,  209;  under  Income  Tax  of 

1916,  35- 

Oil  lands,  valuation  of,  170.     See  also  Petroleum. 

Oklahoma,  constitutional  and  statutory  enactments  in,  108;  historical  notes 
on  taxation  in,  64-66;  taxes  paid  by  mining  industry  in,  in  1909,  211, 
213,  217-223. 

Ore  in  place,  (note)  254. 
Oregon,   constitutional  and   statutory  enactments  in,   no;  taxes  paid  by 

mining  industry  in,  in  1909,  21 1,  213,  216,  220. 

Output  taxation,  advantages  of,  145;  compared  with  other  systems,  143; 
endorsed  by   Governor  of  West  Virginia,  249;   endorsed  by  O.   D. 
Skelton,  249;  objections  to,  145;  on  oil  and  gas,  proposed,  246. 
Patterson,  C.  S.,  on  taxation  in  Utah,  245. 

Pennsylvania,  anthracite  tax  in,  68,  in;  assessed  value  of  coal  lands  in, 
162-164;  assessing  anthracite  lands  and  mines  in,  204;  constitutional 
and  statutory  enactments  in,  in;  historical  notes  on  taxation  in,  66- 
68;  practise  in  assessing  coal  lands  in  western,  166;  taxes  paid  by  min- 
ing industry  of,  in  1909,  211,  213,  215,  218,  220-224. 
Petroleum  and  natural  gas  producers,  taxes  paid  by,  in  1909,  218. 
Petroleum  wells,  appraisal  of,  168,  171,  202. 
Phillips,  J.  B.,  on  assessment  of  mines,  245. 
Phosphate  mines,  taxes  paid  by,  in  1909,  219. 
Policy  regarding  mineral  resources,  22 ;  federal,  22 ;  state,  23. 
Present  value  of  taxes,  142. 

Proceeds  tax,  see  Gross  Proceeds  and  Net  Proceeds. 
Production  tax,  on  anthracite  mines,  ill ;  provided  for  in  constitution  of 
Arizona,  82;  in  constitution  of  Ohio,   107;  in  constitution  of  South 
Carolina,  112;  in  constitution  of  Wyoming,  121.    See  also  Output  Tax 
and  Gross  Proceeds  Tax. 

Progessive  taxation,  as  applied  to  mines,  F.  W.  Taussig  on,  248. 
Property  right,  in  mines  and  mineral  lands,  17. 


803]  INDEX  273 

Property  tax,  historical  notes  on,  37;  in  Arizona,  42.  See  also  General 
Property  Tax. 

Public  domain,  minerals  upon,  13;  leasing  of  mineral  deposits  upon,  13. 

Public  rights  in  natural  resources,  15,  (note)  147,  248,  249. 

Purdy,  Lawson,  state  taxation  of  mines,  proposed  by,  246. 

Quarries,  taxes  paid  by,  in  1909,  220-224. 

Rate  of  taxation,  on  basis  of  output,  143;  on  basis  of  tonnage,  146. 

Raymond,  R.  W.,  on  sovereignty  and  mineral  rights,  15. 

Reforms  in  taxation,  proposed  by  economists,  247 ;  proposed  by  mining 
men,  235 ;  proposed  by  state  officers  and  tax  commissions,  242. 

Rhode  Island,  constitutional  and  statutory  enactments  in,  112;  taxes  paid 
by  mining  industry  in,  in  1909,  211,  220. 

Roberts,  M.,  opinion  of,  on  methods  of  taxing  mines,  240. 

Rogers,  A.  H.,  recommendation  of,  on  method  of  taxation,  236. 

Royalties,  as  affected  by  time  factor,  (note)  238;  as  basis  for  valuation, 
(note)  238;  deduction  of,  not  allowed  in  appraisal  in  Michigan,  191, 
193;  nature  of  mining,  20,  35;  taxation  of,  in  West  Virginia,  202;  in 
Wisconsin,  75,  120. 

Seligman,  E.  R.  A.,  on  income  taxation,  250;  on  incidence  of  taxation,  174. 

Shearman,  T.  G.,  on  taxation  of  natural  resources,  251. 

Single  tax  program,  250. 

Skelton,  O.  D.,  on  mine  taxation,  249. 

Sloan,  R.  E.,  on  gross  proceeds  tax,  245. 

South  Carolina,  constitutional  and  statutory  enactments  in,  112;  histor- 
ical notes  on  taxation  in,  68;  taxes  paid  by  mining  industry  in,  in 
1909,  212,  216. 

South  Dakota,  constitutional  and  statutory  enactments  in,  113;  taxes  paid 
by  mining  industry  in,  in  1909,  216,  220-223. 

Sovereignty  and  mineral  rights,  II. 

State  taxation  of  mines,  proposal  of  Lawson  Purdy,  246;  of  H.  C.  Adams, 
249;  of  I.  A.  Loos,  249;  of  O.  D.  Skelton,  249. 

Statutory  enactments  of  the  states,  78-121. 

Steele,  Heath,  recommendation  of,  on  method  of  taxation,  236. 

Stock  piles,  appraisal  of,  at  Michigan  iron  mines,  191. 

Stock  quotations,  as  basis  of  valuation  in  Michigan,  192;  as  basis  of  val- 
uation opposed  by  National  Tax  Association  Committee,  247. 

Systems  of  mine  taxation  compared,  134-152. 

Taussig,  F.  W.,  on  progressive  taxation,  248;  on  unearned  increment  of 
mines,  248. 

Taxes  paid,  in  1909,  by  all  mines,  211. 

Taylor,  S.  A.,  opinion  of,  on  appraisal  of  coal  lands,  241. 

Tennessee,  assessed  value  of  coal  lands  in,  162,  164;  constitutional  and 
statutory  enactments  in,  113;  taxes  paid  by  mining  industry  in,  in  1909, 

212,  213,  215,  219,  221,  222. 

Texas,  constitutional  and  statutory  enactments  in,  114;  taxes  paid  by  min- 
ing industry  in,  in  1909,  212-219. 


274  MINE  TAXATION  IN  THE  UNITED  STATES  [804 

Time  factor,  importance  of,  in  appraising  mines,   (note)   136,  (note)  238. 

Title  to  minerals  in  lands,  16. 

Tonnage  tax,  advantages  of,  147 ;  compared  with  other  taxes,  145 ;  discussed 
by  H.  C.  Adams;  effect  of,  247;  graduated,  243;  in  Michigan,  52,  129, 
146;  in  Minnesota,  54,  129,  146;  in  Pennsylvania,  66-67,  130;  proposed 
in  1902  by  Minnesota  Tax  Commission,  243;  supported  by  F.  L.  Mc- 
Vey.  See  also  Production  Tax  and  Output  Tax. 

Townsend,  T.  C.,  on  production  tax  on  oil  and  gas,  246. 

Xlglow,  W.  L.,  on  appraisal  of  zinc  mines,  195 ;  on  taxation  of  mines,  239. 

Unconstitutional  laws,  79. 

Unearned  increment  of  mines,  taxation  of,  248;  under  Federal  income 
tax,  208. 

Uniformity  of  taxation  required,  78. 

Utah,  assessed  value  of  coal  lands  in,  163,  164;  assessed  value  of  mines 
in,  in  1913  and  1914,  233 ;  constitutional  and  statutory  enactments  in, 
115;  historical  notes  on  taxation,  69-71;  "mineral  lands"  defined,  n; 
taxes  paid  by  mineral  industry  in,  in  1909,  212-216,  219-223;  C.  S. 
Patterson  on  mine  taxation  in,  245. 

Valuation  of  coal  lands  by  United  States  Geological  Survey,  165. 

Valuation  of  oil  lands  and  wells,  170,  202. 

Valuation  of  mines,  135,  153;  arbitrary,  by  law,  138;  basic  factors  in,  157, 
158,  161,  182,  186;  by  sales  method,  135,  206;  coal,  135,  161,  204;  cop- 
per, lead,  zinc,  and  precious  metal,  156;  in  Michigan,  53;  iron  mines, 
158;  on  capitalized  earnings,  136,  198,  202;  on  market  value  of  secu- 
rities, 192;  on  royalty  basis,  (note)  238;  physical  valuation,  137;  zinc 
mines  in  Wisconsin,  195. 

Value,  as  affected  by  taxes,  173,  174. 

Vermont,  constitutional  and  statutory  enactments  in,  116;  exemptions  from 
taxation  in,  116;  taxes  paid  by  mining  industry  in,  in  1909,  212,  220- 
224. 

Virginia,  assessed  value  of  coal  lands  in,  164;  constitutional  and  statutory 
enactments  in,  116;  historical  notes  on  taxation,  71;  "mineral  lands" 
defined  in,  n;  taxes  paid  by  mining  industry  in,  in  1909,  212,  213, 
215,  220-224. 

Washington,  constitutional  and  statutory  enactments  in,  117;  taxes  paid 
by  mining  industry  in,  in  1909,  212,  213,  220-223. 

West  Virginia,  appraisal  of  oil  wells  in,  171 ;  assessed  value  of  coal  lands 
in,  162,  164;  constitutional  and  statutory  enactments  in,  118;  histor- 
torical  notes  on  taxation  in,  72-74;  methods  of  appraisal  in,  202;  pro- 
posed output  tax  in,  246;  taxes  paid  by  mining  industry  in,  in  1909, 
212,  213,  218. 

Wisconsin,  appraisal  of  mines  in,  194;  constitutional  and  statutory  enact- 
ments in,  119;  historical  notes  on  mining,  14;  historical  notes  on 
taxation,  74-76;  lead  and  zinc  mines  in,  119;  taxes  paid  by  mining 
industry  in,  in  1909,  212,  215,  217,  220-223;  taxation  of  mineral  rights 
in,  172. 


805]  INDEX  275 

Wisconsin  method  of  appraisal,  for  zinc  mines,  196. 

Wisconsin  Tax  Commission,  suggestions  of,  on  mine  taxation,  243. 

Wyoming,  assessed  value  of  coal  lands  in,  164;  constitutional  and  statu- 
tory enactments  in,  121 ;  historical  notes  on  taxation  in,  76-77 ;  taxes 
paid  by  mining  industry  in,  in  19x19,  212,  213,  215,  218-223. 

Zander,  C.  M.,  on  systems  of  mine  taxation,  200,  244;  endorsing  general 
property  tax,  244. 

Zinc  and  lead  mines,  taxes  paid  by,  in  1909,  217. 

Zinc  mines,  appraisal  of,  in  Wisconsin,  120,  194. 


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